New Tax Bill: Opportunities to Reduce 2017 Taxes

Share

Sign Up For Our Newsletter To Receive Weekly Updates.

Under the new tax bill, there are many changes that taxpayers will encounter in 2018. Following are some beneficial steps that can be taken in 2017 under the old tax law.

Deductions

With tax rates decreasing under the new legislation, it could be beneficial to accelerate deductions into the current year. Some deductions are also being taken away, making it even more important to take advantage of these while you still can. Paying January’s mortgage, making donations, and paying real estate taxes can all be done in 2017 to take advantage of the deductions while they are still around.

The medical expense deduction is also being removed in 2018, which affects a good amount of people, especially seniors taking advantage of this for long-term care costs.  If there is a way to prepay medical bills before the end of 2017, it would be advantageous to do this.

Income

Once again, many people will have a lower tax rate in 2018. In this case, it would be beneficial to move any new income you can into 2018 as you would pay less tax on it. If you have a year-end bonus, ask for it to be pushed until the New Year. You can also request that you receive your paycheck for December in January. If you are self-employed, it could be easier for you to move income into 2018.

IRAs

IRAs are another aspect to look at before the end of the year. If you are over 70 ½, make sure to take your required minimum distributions (RMDs) in 2017. The deadline for this is December 31st every year unless it is your first RMD, which can be delayed until April 1st.  If you have more than one IRA account that requires RMDs, you can take all the RMDs from one account; you do not have to take distributions from every account.

Under the new tax bill, Roth recharacterizations are eliminated. A Roth recharacterization is when an IRA, which was already converted from a traditional to a Roth, is then converted back into a traditional IRA.  Roth recharacterizations allowed people to recoup tax money paid when the account was converted to a Roth IRA.  Next year, under the new tax bill, it might be advantageous to do a Roth conversion as your tax rate could be lower, just know that this cannot be undone anymore.

Another IRA strategy that can be put in place before the end of the year is taking advantage of QCDs. QCDs, or qualified charitable distributions, are donations made directly from an IRA that qualify for your required minimum distributions. This can be a great strategy for someone over 70½ who needs to satisfy their RMDs but does not want to raise their income for the year.

Cardinal Advisors

Under this new tax legislation, there are steps to take before the New Year that could be beneficial. Do not make any big decisions on your own; make sure to talk to qualified professional. Cardinal Advisors can help answer your questions.

Hans Scheil is the author of “The Complete Cardinal Guide to Planning for and Living in Retirement” and the accompanying workbook. He can be reached at Hans@CardinalGuide.com.

Get In Touch

Contact us today with any questions, concerns, or just to stay connected.

Contact Us

Have questions? Contact us today.

[contact-form-7 id="d91790a" title="Contact Us"]
Scroll to Top

Weekly Email

Want to get important updates first?

Don’t miss out on any important info, from Medicare deadlines to taxes, we will keep you updated! Try it out, you can always unsubscribe at any time.

Newsletter