WTOP Interview: Year end Tax Planning in a Year of Uncertainty

Interview Transcript:

Shawn Anderson: As Congress works on its tax reform legislation, there are still many things you can do before the end of the year to reduce your 2017 tax bill.

Hillary Howard: Joining us live with some year-end tax tips, Nina Mitchell co-founder of Her Wealth and Partner at The Colony Group. Good to see you as always Nina.

Nina Mitchell: Great to be here.

Hillary: So, given the back and forth going on in Congress about tax reform, what do we have to do about our taxes for 2017?

Nina: Well, as much as Congress wants to overhaul the U.S. tax code and fast track their tax reforms, there’s still many details to be worked out and all of which will probably impact 2018, not 2017. There’s still a lot of negotiating for the final bill passes.

Shawn: So, what are you advising clients to do before January first, to save on their taxes?

Nina: Well, many clients wait to make their charitable donations at year end and so we have two strategies that we recommend.

1.    The first is donating appreciate securities, which have again been held for more than one year and since the stock market has done very well this year, your portfolio may have large gains and donating appreciate securities to a qualified charity, eliminates the capital gain income and provides a nice tax deduction for the appreciated value.

2.    And then, a second strategy is making a qualified charitable distribution from your IRA. And this is a great tax strategy for retirees over age 70, who don’t need the income from their IRA and instead can donate their required minimum distribution to a charity and avoid the taxes they would normally pay on their RMD income. And you know, given how well the stock market has done this year, you should probably brace yourself for some big capital gain distributions at year end. So, you might want to look for any capital loss positions to offset those capital gains and you can write off up to $3,000 of capital losses against your ordinary income. And of course don’t forget to fully fund your 401K by year end.

Hillary: So, are there other ways we might be able to take advantage of any pending tax reform opportunities before the end of this year?

Nina: Well, that’s a great question. I think we’re fairly certain of two things, that tax rates for corporations and some individuals will likely be lower next year. So, you might want to defer any income to 2018 and several deductions may be eliminated or capped. And so if you’re not impacted by the alternative minimum tax for 2017, you might want to pay certain itemized deductions, such as real estate taxes, medical expenses and even fourth quarter state tax estimates, prior to year-end because these itemized deductions might be on the chopping block. And one itemized deduction that’s getting a lot of attention, is actually the mortgage interest and so if you are considering buying a house with a mortgage, that basically if that mortgage is over five hundred thousand, which really isn’t that high for this area, that also might be capped going into with this new tax proposal. So, you might want to just make sure you buy that house prior to year- end because that’s all kind of on the proposal for next year.

I would definitely encourage all of our listeners to read the tax article you know, on the WTOP and Her Wealth website.

Shawn: Alright. Nina, thanks so much. Nina Mitchell, with the Colony Group. She writes about it on wtop.com, search Her Wealth.