Some EOY Tax Items to Consider

in Market Commentary by

The Dow, S&P, and Nasdaq all finished the shortened trading week with strong weekly gains, S&P closed above 2,600 for the first time in anticipation of a strong holiday shopping season. Tech stocks advanced 1.8% this week, leading all other sectors.

Weekly Returns:
S&P 500: 2,602.42 (+.90%)
FTSE All-World ex-US: (+1.65%)
US 10 Year Treasury Yield: 2.34% (.00%)
Gold: $1,288.20 (-.46%)
EUR/USD: $1.193 (-1.1%)

Major Events:

  • Monday – Justice Department files lawsuit challenging AT&T-Time Warner deal
  • Tuesday – FCC plan to roll back net neutrality rules sets up win for cable, wireless firms
  • Wednesday – Meg Whitman to step down as Hewlett Packard Enterprise CEO
  • Thursday – Thanksgiving holiday
  • Friday – Online spending up 18% on Black Friday vs. 2016

Our take:

While all eyes may be focused on the proposed tax bill in Washington, you shouldn’t forget about fine tuning any last-minute tax items for 2017 year-end tax planning. Often, the best action items will depend on whether you see your income going up or down next year. Here are some factors that can be relevant to your situation:

Marriage & Taxes
Getting married and you both will have significant income? You may be facing a potential higher tax bracket for married couples next year. You might want to consider accelerating some income into the current year or deferring deduction into 2018

Employer Sponsored Retirement Plans
In most cases, fully funding your company 401k with pretax dollars will reduce current-year taxes and increase your retirement nest egg.

Capital Gains & Losses
Will you have any gains or losses that can be off set? If you have losses, it could make sense to accelerate more gains this year so you don’t have to push them into next year. If you have gains, review any positions that could make sense to sell this year to keep them at a lower amount.

Reporting Healthcare Coverage
According to the IRS, if your tax return does not indicate whether you and your family had healthcare coverage during the year, your return will not be processed. This is the first year that the IRS is refusing to process returns if this information is omitted from the return.

Flex Spending Accounts
Most FSA accounts will not carry any money over to the next year. Some employers will allow you to use it until March of 2018. You should check with your employer to see if they give employees the optional grace period to March 15.

Vacation Home Rentals
If you rent out a vacation home that you also use for personal purposes, you should review the number of days it was used for business versus pleasure to see if there are ways to maximize tax savings with respect to that property.

Required Minimum Distributions (RMDs)
Taxpayers 70 1/2 years old and older who own an IRA are required to take minimum distributions from that account each year and include those amounts in taxable income. Make sure you review all your accounts and take that distribution to avoid a 50% penalty. If you don’t need the income and are concerned about being bumped up to another tax bracket, you can utilize charitable giving. A special rule allows you to make a charitable contribution directly from your IRA to a charity. You may be able to deduct the amount as an itemized deduction. By making the contribution directly to a charity, it counts towards your RMD and that amount will not be included in income.

Contact a Financial Advisor

This blog is for informational purposes only; we are not in the business of providing tax or legal advice and we generally recommend seeking the advice and counsel of a tax professional before taking any action that may cause a material taxable event.

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Amin Dabit, CFP®

Amin Dabit, CFP®

Amin Dabit is the Director of Advisor Services with Personal Capital. Along with the EVP of Advisory, Amin helps lead Personal Capital’s financial planning experience and advice. Amin brings over a dozen years of experience in private wealth management and financial planning. Amin works with the advisory team to identify and establish strategies for reaching clients' financial goals by providing comprehensive, customized financial advice designed to improve their financial lives.

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