As the year draws to a close, we begin to think about taxes and planning for the upcoming year. There’s no telling what the tax rules will be for 2018, but we might as well take control of what we can — our own spending and planning.
Stay disciplined over the holidays with your budget and remember the extra $10 per gift adds up. Personally made gifts like pickles or jelly, a promise to cook a meal at some date in the future, even giving a certificate of your own time to rake leaves, run errands or help with “honey do lists” can mean a lot and not cost a lot of money.
As for planning for the upcoming year, it’s expected that deductions will be worth more this year than next. You may want to go ahead and make your charitable gifts for both 2017 and 2018 before the end of the year to take advantage of the full benefit. Also, city and local taxes in the Knoxville area aren’t due until March, but you can go ahead and pay them before the end of the year. That way, if the state and local tax (SALT) deduction is phased out, you can still have the benefit of that deduction.
Likewise, it’s advisable to maximize your contributions to retirement, health savings or other tax-sheltered accounts you have. If you are over 70and-a-half, you can make charitable rollovers from your IRA of up to $100,000.
Looking at the other side of the ledger, if you can defer taxable income, it might be prudent to do so since the congressional tax bills will likely lower income tax rates for 2018. By the same token, if you experienced losses in your investment accounts, you can harvest those to offset your capital gains for this year. We also advise taking gains when the market has gone up. Yes, those realized gains result in taxes being due, but they protect you as well.
It’s also a good time to begin preparing your tax records for 2018. Pull together your receipts and start a new folder for the tax documents you’ll begin receiving in January.
If you have a large estate, now is a good time to plan family gifting. You can gift up to $14,000 per person per year without any tax consequence. It is recommended you make these gifts in January, instead of waiting until later in the year.
Even though it can be easy to get wrapped up in taxes and making sure you’re in a good financial situation for the coming year, don’t forget the greatest gift is time with one another. You can’t put a value on sharing laughter and cheer with your loved ones, so be sure to cherish it this and every holiday season.
Best wishes to you and your family for a very Merry Christmas and happy holiday season.
Sharon Pryse, chairman and founder of The Trust Company, may be reached at email@example.com.