IS SEVEN YOUR LUCKY PLANNING NUMBER?

IS SEVEN YOUR LUCKY PLANNING NUMBER?

Are you taking measures TODAY to optimize your financial and tax position for 2018?

Naaman, a man of power and prestige, was cursed with the dreaded plague of leprosy—generally a slow, painful, and ignominious death sentence. In hearing of a man who could heal leprosy, Naaman immediately went in search of and found this man. The healer’s prescription for him was simple: “Go and wash in the River Jordan seven times.” Naaman was incensed! How could such a simple and unusual remedy cure him? Fortunately, accompanying Naaman was a faithful advisor who urged him to just try it. Naaman acquiesced and submersed himself seven times in the River Jordan. To his amazement, he was miraculously healed!

Momentous tax reform passed at the end of 2017 effective for this year. More than ever before, purposeful and timely year-end planning may pay significantly—and in some instances, almost miraculous—dividends. What follows are seven simple tax or financial planning steps or ideas that you may want to consider. Acting now may save you thousands!

1. Maximize Retirement Plan Contributions

Maximize 401(k) retirement plan contributions by the end of the year. Any dollar amount you contribute to your 401(k) or similar employer-based retirement plan (if it's not a Roth) is excluded from your income, thus lowering your tax bill. If you have a plan where your employer will match a prescribed amount of your contributions to the plan, take advantage of it.

Contributions to a traditional individual retirement account (IRA) are tax deductible, within certain limits, and are later taxable when you make withdrawals. If you have a Roth IRA, you can invest after-tax dollars in the account, and future withdrawals are tax free (provided certain rules are met). You have until April 15, 2019, to establish and fund a traditional or Roth IRA for 2018.

2. Save Money with a Flexible Spending Account

If you have a Flexible Spending Account (FSA), make sure you use the FSA funds for eligible expenditures by December 31. Use the money to buy new glasses or contacts, visit your dentist, or buy other items that qualify under your FSA plan. Any amount that remains in your flex account after year-end is permanently lost. (Note that some plans have a grace period for payments made after year-end).

3. Bunch Itemized Deductions

The standard deduction for taxpayers increased dramatically in 2017: $24,000 for married filers, $12,000 for singles, and $18,000 for household heads. Also, many popular deductions were either pared back or eliminated altogether. If you estimate that you will be at or near the standard deduction amount in both 2018 and 2019, you may want to accelerate or defer deductible expenses to qualify for itemized deductions. This maximizes the overall benefit of such deductions. For example, you could accelerate your mortgage payment into this year by making a payment before year-end, thus increasing deductible interest. Or you could bunch charitable contributions you were planning to pay over the two years into one year.

4. Make Charitable Contributions Tax Efficiently

If you itemize deductions, consider giving appreciated stocks or mutual fund shares you have owned for more than one year to a qualified charity. Your charitable contribution deduction is based on the fair market value of the securities on the date of the gift, not the amount you paid for the asset. You never have to pay tax on the profit.

Consider setting up a Donor Advised Fund (DAF). This is an effective way to bunch charitable contributions that you ultimately want to make to qualified charities. While investments are held in the DAF, any investment gains are tax free.

5. Evaluate Your Insurance

Year-end is a good time to take inventory of your overall financial fitness. If you own permanent insurance, when was the last time you had it reviewed for performance? Have your objectives changed since the insurance was placed? How have changes in tax laws impacted the amount of death benefit you need?

Due to favorable tax laws related to life insurance, a policy grows with taxes deferred. In addition, cash value in the policy may be accessed tax free through withdrawals and loans, and death benefits are tax free. Is your insurance designed to take advantage of these unique tax benefits?

Especially for those who are elderly or who have had a change in health—never cancel a policy or allow a policy to lapse without first consulting a professional. Click here if you would like to receive additional information or would like a complimentary review of your insurance.

6. Review Your Investment Portfolio

Is your investment portfolio aligned with your risk tolerance? Are your asset allocations appropriate for your income and retirement horizon? Many people have simply allowed their investments to run on autopilot or allowed their cash to languish in low-interest-bearing accounts. Notwithstanding the recent volatility in the stock market, the market has experienced an almost unprecedented bull run since March 2009. To the uninitiated, this forebodes risk. To the financially prudent, this means potential opportunity.

Have you generated capital gains during the year? Consider doing some tax loss harvesting before year-end. Consult an advisor to ascertain that your investments are optimally allocated to achieve your objectives. Feel free to send me an email if you would like to schedule a complimentary review of your portfolio.

7. Make Needed Small Business Asset Purchases

For qualifying property placed in service in 2018, the new tax act increased the maximum Section 179 deduction to $1 million (up from $500,000 in 2017). First-year 100% bonus depreciation was expanded to include not only new but used property acquired and placed in service in 2018. This allows a business to write off the cost of some or all of its qualified 2018 asset additions on this year’s return. Consider purchasing or financing needed acquisitions between now and year-end. Before making such purchases, contact your advisor for requirements in taking advantage of these tax benefits.

The above list is by no means all-inclusive. It is, however, illustrative of steps that may be taken to reduce your tax bite and put saved dollars in your pocket. Although the tax reform itself is massive and complex, we can make it simple for you. Had Naaman dismissed the recommended solution to cure his malady, he would have paid a heavy price. Just as Naaman’s advisor did, we simply ask that you act!

Our firm stands ready to help. Just shoot us an email or give us a call!

Braxton B. Barnes

Financial Advisor | Relationship Manager

[email protected]

CAPTRUST | 1776 Advisor Group | 13961 S. Minuteman Dr., Suite 300 | Salt Lake City, UT 84020

801.984.8000 main | 919.870.8891 fax

www.captrust.com

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