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    Financial planning: Your year-end ‘to do’ list

    Selling losing investments, making charitable donations among steps to take

    Jeff Witz, CFPJeff Witz, CFP David ZemonDavid Zemon


    What can I do proactively for my financial plan as we head into year end?

    We are in a uniquely difficult position as we head toward the end of the year. Normally, this is the perfect time to wrap up final financial and tax-planning items. However, the potential GOP tax bill makes it difficult to know exactly how the landscape will look in 2018. If and when a new tax bill is finalized, we will be sure to provide an update on how changes may impact you. Nevertheless, there are some items you can take care of before the end of the year that can impact your 2017 taxes and overall financial plan.

    Do you own stocks and other marketable securities outside of your retirement accounts that have lost money? If so, consider selling those losing investments to lower your 2017 tax bill. This strategy allows you to deduct the resulting capital losses against this year's capital gains. If your losses exceed your gains, you will have a net capital loss.

    You can deduct up to $3,000 of net capital loss (or $1,500 if you are married and file separately) against ordinary income, including your salary, self-employment income, alimony, and interest income. Any excess net capital loss is carried forward to future years and puts you in position for tax savings in 2018 and beyond.

    Also by Jeff Witz, CFP, and David Zemon: How to choose between Roth, traditional accounts

    Suppose you are fortunate enough to have the reverse situation: You own stocks and other marketable securities (outside of your retirement accounts) that have substantially increased in value since they were acquired. Taxpayers in the 10% or 15% income tax brackets can sell the appreciated shares and take advantage of the 0% federal income tax bracket available on long-term capital gains. Giving qualified dividend-paying stocks to family members eligible for the 0% rate is another tax-smart idea. But before making a gift, consider any gift tax consequences.

    The annual gift tax exclusion is $14,000 in 2017 ($28,000 for married couples). You can gift this amount to any number of individuals without having to pay gift tax or have it count against your lifetime gift and estate tax exemption. Looking to 2018, for the first time since 2012, the IRS is increasing the gift tax exclusion amount to $15,000 ($30,000 for married couples).

    Charitable donations can be one of the most powerful tax-savings tools because you're in complete control of when and how much you give. No floor applies, and annual deduction limits are high (20%, 30%, or 50% of your adjusted gross income, depending on what you're giving and whether a public charity or a private foundation is the recipient).

    If you have appreciated stock or mutual fund shares that you've owned for more than a year, consider donating them instead of cash. You can generally claim a charitable deduction for the full market value at the time of the donation and avoid any capital gains tax hit.

    If you own stocks worth less than you paid, don't donate them to a charity. Instead, sell the stock and give the cash proceeds to a charity. That way, you can generally deduct the full amount of the cash donation while keeping the tax-saving capital loss for yourself.

    Next: Revising beneficiaries


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