Year End Planning Checklist

Elizabeth Cody

As year-end approaches, it is time to review strategic planning opportunities with your trusted advisors. As we await the outcome of the tax reform bill, it is a good time to start the dialogue and prepare to act. With that in mind, here is a list of end-of-the-year financial tasks for your consideration.

  1. Tax-Loss Harvesting – Investment losses can be used to offset capital gains realized in your portfolios. If you do not have enough capital gains to offset these losses, you can use up to $3,000 against your ordinary income. Any excess can be carried over for future years. Remember to wait at least 31 days if you would like to buy back the stock to avoid the IRS wash sale rule. (IRS Section 1211(b), Section 1212)
  2. Fully Fund Your 401(k) – You can defer up to $18,000 of your compensation with an additional $6,000 allowed if you are 50 or older. Keep in mind that, unlike an IRA, contributions must be made prior to year-end in order to be deductible. If you haven’t contributed the maximum for 2017, consider increasing your 401(k) percentage withheld to apply to any year-end bonus you may receive. (IRC Section 401(k))
  3. Accelerate Deductions – This is beneficial if you think you will be in a lower tax bracket in 2018. You can make your January mortgage payment in 2017. If the GOP’s tax proposal passes, standard deductions will increase and many individuals will find that itemized deductions will no longer benefit them. The GOP tax plan eliminates the deduction for state and local income taxes and eliminates (Senate bill) or limits property tax deductions to $10,000 (House bill), so you may also wish to prepay your property and state income taxes but check with your accountant to determine if you are subject to the Alternative Minimum Tax (AMT).
  4. Flexible Spending Accounts – Verify rules under your plan to determine if your company offers a grace period into spring or a $500 FSA carry-over into the next year. You may need to spend the balance on qualified health care expenses before the end of the year. (IRC Section 125)
  5. Donate Directly from Your IRA – If you are over 70 1/2 and you gift directly from your IRA to a charity, the gift counts toward your Required Minimum Distribution (RMD) for the year. You won’t get a separate charitable deduction for the gift to charity, but the distribution from the IRA will not be treated as taxable income as it would for a normal IRA distribution. Using this approach to charitable giving will not subject the gift to itemized deduction phase-outs or AGI limitations. Remember donor-advised funds (DAFs) are not eligible recipients. (IRC Section 408(d)(8))
  6. Maximize Your Gift Allowance – You can give $14,000 this year to as many people as desired without paying gift tax or using up any of your $5.49 million lifetime exclusion thus moving the current value of all gifts plus all future appreciation out of your estate. The transfer may also save family income taxes where income-earning property is given to family members in lower income tax brackets. Make sure they are not subject to the kiddie tax, which dictates that unearned income above a $2,100 threshold is taxed at the parents’ highest rate. Also consider that gifting high basis assets or cash is more advantageous than gifting low cost assets which pass on any built-in gain to the gift recipient. You can also make unlimited payments of qualified medical expenses and tuition if paid directly to the company or institution, which would not be applied toward your annual gift allowance. (IRC Section 2503(b))
  7. Establish a Roth IRA for Children – If children or grandchildren have earned income, gifting them money to fund a Roth IRA can be a powerful wealth-transfer planning tool, especially in years when children are subject to low income tax rates. (IRC Section 408A)
  8. Create a DAF – If you have significant tax obligations this year, it may make sense to create and fund a DAF so that you get the tax deduction in 2017 but can defer the disbursement of funds to charity in future years. Deductions include up to 50% of adjusted gross income (AGI) for gifts of cash and up to 30% of AGI for gifts of appreciated securities. By donating low cost appreciated securities held more than one year, you can also avoid the capital gains taxes on the asset. (IRC Section 170(b))

Given the proposed tax reforms such as reducing marginal tax rates, increasing the standard deduction and eliminating the Alternative Minimum Tax and state and local tax deductions, planning for year-end has become more challenging, so these potential tax savings and planning opportunities should be coordinated with your wealth advisor, accountant and estate planning attorney.


(Source:  Internal Revenue Code “IRC”).

This information has been developed internally and/or obtained from sources that Sand Hill Global Advisors, LLC (“SHGA”), believes to be reliable; however, SHGA does not guarantee the accuracy, adequacy or completeness of such information nor do we guarantee the appropriateness of any investment approach or security referred to for any particular investor. This material is provided for informational purposes only and is not advice or a recommendation for the purchase or sale of any security. This information reflects subjective judgments and assumptions, and unexpected events may occur. Therefore, there can be no assurance that developments will transpire as forecasted. This material reflects the opinion of SHGA on the date made and is subject to change at any time without notice. SHGA has no obligation to update this material. We do not suggest that any strategy described herein is applicable to every client of or portfolio managed by SHGA. In preparing this material, SHGA has not taken into account the investment objectives, financial situation or particular needs of any particular person. Before making an investment decision, you should consider, with or without the assistance of a professional advisor, whether the information provided in this material is appropriate in light of your particular investment needs, objectives and financial circumstances. Transactions in securities give rise to substantial risk and are not suitable for all investors. No part of this material may be (i) copied, photocopied, or duplicated in any form, by any means, or (ii) redistributed without the prior written consent of SHGA.