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How to take advantage of the new tax legislation before Dec. 31

By December 14, 2017December 20th, 2017Federation Notes

Year-End Planning: Impact of New Legislation

Now that the House and Senate have ironed out their differences in their respective versions of the tax cut bills, now is the time to consider strategies that can impact your 2017 and 2018 taxes. Although many will see their tax rates go down in 2018, this reduction may be more than offset by the loss of certain deductible items.

For individuals, the cornerstone of both the House and Senate tax cut bills is a doubling of the standard deduction in 2018 (to approximately $28,000 for married couples). At the same time, a number of so-called itemized deductions will be eliminated or limited in value. As a consequence, taxpayers won’t be itemizing their deductions unless their total of home mortgage interest, charitable contributions, and perhaps up to $10,000 in local property taxes exceeds the $28,000 threshold.

For those who could be claiming the standard deduction in 2018, it may pay to consider accelerating some payments before the end of this calendar year. And accelerating deductions could also make sense for those who will continue to itemize. The bottom line is that it is essential to “run the numbers” to see how strategies such as those discussed below will impact your 2017 and potential 2018 tax bills.

Year-end strategies include:

Accelerate charitable contributions: making larger charitable donations by December 31, 2017, also may make sense, especially for those who may not itemize in 2018. Consider paying outstanding pledges, or in some cases, next year’s gift before the end of the calendar year.

Gift appreciated securities to charity: contributions of appreciated securities, including stocks, bonds, and mutual fund shares remain one of the most tax-efficient ways to support the charity of your choice. With many stocks hovering at or near all-time highs, donating appreciated securities provides you with a deduction worth the fair market value of the stock at the time it is donated, and you avoid paying any capital gains tax on the underlying appreciation.

This is for informational purposes only and should not be construed as legal, tax or financial advice. When considering gift planning strategies, you should always consult with your own legal and tax advisors.