Year End Tax Planning - Tax Cut & Jobs Act

December 20, 2017

With the Tax Cut & Jobs Act heading for signature by the President, there are a handful of valuable tax provisions that some individuals and company owners may want to take advantage of before they are retracted.


The 503 page bill will undoubtedly restructure the U.S. tax code, with new tax rates and numerous changes to existing provisions due to become effective January 1, 2018. However, most of the old rules will still be applicable and valid in the last few days of 2017.


Charitable Donations:

Making last minute charitable contributions could be even more effective.  If your tax rate is scheduled to decrease in 2018, then your deductions are more valuable if they are claimed against this year’s income.  Charitable deductions will be preserved under the new tax bill, yet is an effective way to boost your 2017 deductions on short notice.


Defer Income:

While salaried workers (W2 wage earners) generally can’t choose when they get paid, business owners can often delay registering income until the following year, lowering their April tax bill in the process.  Individual investors can also modify taxable income and lower capital gains realizations by selling stocks with a loss or waiting to sell stocks with a gain until 2018.  But, if a lower tax rate is expected for you next year, then deferring income into 2018 might be a wise option.

Pay Some More Taxes:

The new tax bill also limits how much state and local taxes (SALT) individuals are able to deduct. The limit under the bill is no more than $10,000 of a combination of property taxes and either income or sales taxes.  Any 2018 state and local income taxes paid ahead of time would need to be counted on next year’s taxes, according to the bill.  


Employee Reimbursements:

The current tax codes allow employees to deduct unreimbursed expenses related to their jobs as long as they’re more than 2 percent of income.  The new tax bill will end these itemized deductions after the end of this year.  Examples of unreimbursed expenses for employees might include tools and supplies, occupational taxes, work uniforms, union dues and expenses for work-related travel.  Self-employed individuals and small business owners will still be able to deduct expenses under the new tax bill.


Meet With Your CPA/Accountant:

After January 1, 2018, individual taxpayers will no longer be able to deduct tax preparation fees, a long time favorite deduction for both accountants and taxpayers. So any related tax preparation fees or tax software expenses made this year, should still be deductible on tax returns filed in April.  It might be wise to buy a tax software package or make an appointment with your CPA before the end of the year.

In addition to the above noted last minute actions before the new tax bill takes effect, here are a few common year-end practices in order to maximize tax benefits for the year:

  • Maximize your 401(k) contributions before Dec 31st. Participants in employer sponsored 401(k) plans have the ability to contribute up to $18,000 for 2017, along with an additional $6,000 catch up contribution for workers age 50 and older.

  • If you’re not covered by a 401(k) plan, you may be eligible to deduct an IRA contribution of up to $5,000 for 2017, along with an additional $1,000 catch up contribution for individuals age 50 and older. Remember, there are limitations on taking IRA deductions based on income.

  • If you’re 70 ½ or older and have money in an IRA, 401(k), or any type of employer sponsored retirement plan, you need to make sure that you’ve reached the Required Minimum Distribution (RMD) for the accounts. Failure to take the full, required withdrawal can result in a penalty of 50% of the amount of the RMD not withdrawn. If you turned 70 ½ in 2017, you can delay the first required distribution until April 2018, but if you do delay then the IRS requires that both the 2017 & 2018 distribution be taken in the same year (2018), thus increasing your taxable income. Read our Blog "Beware of the 50% Penalty" for more information. 

Sources: IRS,


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