Dear Clients and Friends,

With the end of the year approaching, it is a good time to review your 2017 income tax situation and take steps to ensure that you are taking full advantage of the many tax planning strategies available. For 2017, the top federal income tax rate is 39.6%, but higher-income individuals can also be hit by the 0.9% additional Medicare tax on wages and self-employment income and the 3.8% Net Investment Income Tax (NIIT), which can both result in a higher-than-advertised marginal federal income tax rate.

Before we get to specific suggestions, here are three important considerations to keep in mind:

 

  1. There are currently two tax reform bills moving through Congress, both of which would be effective in 2018. Although it is too early to tell if tax reform legislation will ultimately be enacted and what exactly it might contain, it will be important to monitor the progress of the tax reform legislation and consider its potential impact on year-end tax planning.

  2. Effective tax planning requires considering both this year and next year, at a minimum. Without a multi-year outlook, you cannot be sure planning strategies intended to save taxes on your 2017 return will not backfire and cost additional money in the future.

  3. Be on the alert for the Alternative Minimum Tax (AMT) in all of your planning. What may be a great planning strategy for regular tax purposes may create or increase an AMT problem. You will likely be hit with AMT if you deduct a significant amount of state and local taxes, claim multiple dependents, exercise incentive stock options, or recognize a large capital gain this year. The repeal of AMT is in both tax reform bills.


Download our Year-End Tax Planning Letter for more tax-saving ideas for you to consider. As always, you can call on us to help you sort through the options and implement strategies that make sense for you.

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