Year-end money moves complicated by impending tax reform

Year-end planning is more complicated in 2017 than in the past because of tax changes expected to be finalized by Christmas. As we wait for details, there are still important money moves to make before 2018.

--Review itemized deductions. The main theme for 2017 year-end planning for the nearly one-third of taxpayers who itemize their deductions is clear: This will likely be the last year that you will be able to deduct state and local taxes (SALT) and miscellaneous deductions (taxprep fees, job-hunting and business car expenses, and professional dues), if they total more than 2 percent of your adjusted gross income. For that reason, if possible, try to bunch as many of these costs into 2017 as you can in order to exceed the 2 percent floor.

The deduction on property taxes looks like it will be limited to $10,000, which means that you may want to consider pre-paying next year’s tax bill. You need to pay the taxing authority directly; sending a check to an escrow account won’t cut it. There is a caveat: Prepaying may subject you to the alternative minimum tax, which can offset the benefit.

--Use highly appreciated securities for charitable contributions. If you itemize, you’ll write off the current market value (not merely what you paid for them) and escape taxes on the accumulated gains.

--Sell losers in taxable accounts. If you have investment losses in a taxable account, you can sell them to offset gains from this year. If you have more losses than gains, you can deduct up to $3,000 against ordinary income; if losses exceed $3,000, you can carry over that amount to future years. A tax change that could go into effect next year would force investors to sell stocks on a first-in, firstout basis, which could reduce tax savings with this strategy next year.

--Consider pushing income into 2018, especially if you are self-employed. Some people may benefit from lower tax brackets and some owners of pass through organizations (SCorps, LLCs and partnerships) could see lower taxes next year.

--Use your gift tax exclusion. You can give up to $14,000 ($28,000 with a married spouse) to as many people as you wish in 2017, free of gift or estate tax. You can also make unlimited payments directly to medical providers or educational institutions on behalf of others without incurring a taxable gift or dipping into your lifetime gift-tax exemption.

--Fully fund college savings 529 plans. You can invest up to $14,000 in 2017, tax free, without incurring a federal gift tax, and many states offer state tax deductions for the contributions. Under the Senate proposal, you may be able to use 529 plans to fund certain private high school tuition in the future.

--Fully fund employersponsored retirement plan contributions. The deadline for funding 401(k), 403(b) or 457 plans is Dec. 31. If you are not maxed out yet, you may be able to bump up your contribution on 2017’s last paychecks. The limit is $18,000, plus an additional $6,000 if you are over 50.

--Take required minimum distributions (RMDs). Uncle Sam requires that you withdraw money from retirement accounts after you turn 70 ½. RMD withdrawals must occur by Dec. 31, and failure to make them results in a whopping 50 percent penalty on the amount you should have withdrawn. If you have multiple individual retirement accounts, you only need to take one RMD based on your age and the total value of the accounts. However, if you also have a 401(k) or 403(b), you need to take the RMD from each account individually. You should consult IRS. gov for more specifics.