Year-end Financial and Tax Planning Strategies

Year-end is often the most opportune time to consider financial and tax planning strategies. Congress and the White House are negotiating significant changes in the tax laws that could, if enacted, impact financial strategies. Because changes in the tax code may become effective after the start of 2018, it becomes more important than ever to meet with your advisors to review your investment portfolio and consider tax, financial and charitable giving strategies before December 31.

Income Taxes: If comprehensive tax reform (or even a slimmed down “tax cut package”) is enacted, both marginal tax rates (the rate you pay on “the next dollar” of income) or the effective tax rate (your average rate on all items of income and deductions) is likely to change.  The mix of changes to specific tax deductions and credits by any tax reform plan will have a dramatic impact on your overall tax situation.

Tried and true year-end tax strategies generally revolve around shifting some tax burden to a future year. Deferring receipt of a bonus payment to 2018, accelerating deductions into this year by prepaying a deductible expense, or making larger charitable gifts all can lower this year’s tax bill. For those who itemize their deductions, gifts of cash to public charities such as the Columbus Jewish Foundation are fully deductible, up to 50 percent of adjusted gross income. Any excess can be carried forward and could be deductible for up to five years.

Investment Assets: With the stock market at an all-time high, year-end is an opportune time to review your investment portfolio and consider timing the recognition of capital gains and losses for assets held long-term (more than one year) and short-term.

Part of your capital asset review could be consideration of a gift of appreciated securities to charities. For example, you can avoid paying any capital gains tax on the value of securities transferred to the Columbus Jewish Foundation and may be able to receive a charitable contribution deduction for the full fair market value of the securities at the time of the gift.

Gifts of appreciated assets are deductible up to 30 percent of adjusted gross income. Again, any excess can generally be carried forward and be deductible for up to five years.

Donating appreciated stock, either to create a Donor Advised Fund at the Foundation or to add to an existing Donor Advised Fund, is an excellent way to maximize tax savings. Gifts to Donor Advised Funds are deductible in the current year and provide a vehicle for charitable grants to Jewish or non-Jewish organizations in current or future years.

You can reach us here at the Columbus Jewish Foundation at (614) 338-2365.

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