As the end of the year approaches, it’s time to consider strategies that could help you reduce your tax bill. The window of opportunity for many tax-saving moves closes on December 31, so it’s important to evaluate your tax situation now. You can still take steps to improve your bottom line for the 2017 tax year.

At Bartlett, we believe in taking a comprehensive approach to wealth management. This includes managing your accounts tax-efficiently by employing tax-loss harvesting and tax-efficient asset placement.

Although tax reform could be on the horizon, we’re basing the following checklist on current tax law. See which year-end tax planning tips might apply to you.

Financial investments

• Tax-loss harvesting should be a part of your investment management. Consider selling stock if you have capital losses this year that you need to offset with capital gain income. Avoid a “wash sale” transaction by waiting 31 days to purchase back a security you sold at a capital loss.
• Review your asset allocation across all your portfolios to ensure that the most tax efficient assets are placed in your taxable brokerage accounts and the more tax inefficient assets are placed in your tax-deferred or Roth accounts.
• Be sure to consider your other income and deductions for the current year and next year when deciding whether to trigger any capital gains. A two-year income tax projection should always be prepared as a part of your year-end tax planning.

Retirement contributions

• Make the maximum deductible contribution to your IRA. Contribute the full amount to a spousal IRA, if possible. If you meet all requirements, you may be able to deduct annual contributions of $5,500 to your traditional IRA and $5,500 to your spouse’s IRA. You may be able to contribute and deduct $1,000 more if you’re at least age 50.
• Set up a retirement plan for yourself and fully fund it, if you are a self-employed taxpayer.
• Set up an IRA for each of your children who have earned income.

Charitable donations

• Make a charitable donation before the end of the year. Remember to keep all receipts from the recipient charity. Make sure that the receipt of non-cash charitable contributions contains a detailed list of items donated and associated values.
• Use appreciated stock rather than cash when contributing to charities. This may help you avoid income tax on the built-in gain in the stock, while at the same time maximizing your charitable deduction.
• Consider pre-funding several years of charitable contributions by contributing to a Donor Advised Fund in the current year if you have high income that could be offset by a large charitable deduction.
• If you are over 70½ and are making Required Minimum Distributions (RMD), consider making a qualified charitable distribution from your IRA as part of your charitable giving strategy. You can direct as much as $100,000 per year to a public charity and the amount counts against your RMD.

Estate and gift planning

• Consider making gifts of up to $14,000 ($28,000 per married couple) per person per year federal gift tax free under the annual gift tax exclusion. Gifts above this value will reduce your $5,490,000 lifetime gift/estate exclusion. Use assets that are likely to appreciate significantly for optimum income tax savings.
• Review your Estate Planning Documents to ensure that they reflect all your wishes with regards to the distribution of your estate and guardianship of your children.
• Confirm that all incapacity and health care decision documents are executed and kept in a safe place.
• Consider gifts of medical or educational expenses paid directly to the provider as these gifts will not count against the annual or lifetime exclusions.

Family tax planning

• Determine whether you can shift income to family members who are in lower tax brackets to minimize overall taxes. Consider making gifts of up to $14,000 per person gift tax free under the annual gift exclusion. Also consider the kiddie tax described next.
• The kiddie tax rules apply to: (1) those under age 18, (2) those age 18 whose earned income doesn’t exceed one-half of their support, and (3) those age 19 to 23 who are full-time students and whose earned income doesn’t exceed one-half of their support.
• Take advantage of tax credits for higher education costs if you’re eligible to do so. These may include the American Opportunity (Hope) credit and the Lifetime Learning credit. Note that these credits are based on the tax year rather than the academic year. Therefore, you should try to bunch expenses to maximize the education credits.
• Make sure that you have applied for Social Security numbers for all new dependents. Otherwise, the dependency exemption on your income tax return may be disallowed.

Business income and expenses

• Self-employed individuals (who generally use the cash method of accounting) can defer income by delaying the billing of clients until next year. You may also be able to defer a bonus until the following year.
• Use installment sale agreements to spread out any potential capital gains among future taxable periods.
• Accelerate expenses (such as repair work and the purchase of supplies and equipment) in the current year to lower your tax bill.
• If you have significant business losses this year, it may be possible for you to apply them to the prior year’s returns to receive a net operating loss carryback refund. If you had significant income in prior years, you should maximize the current year’s losses by deferring income if possible.
• In certain circumstances, it may be possible for the full cost of last-minute purchases of equipment to be deducted currently by taking advantage of Section 179 deductions.
• Generally, you can contribute to your retirement plan at any time up to the due date (plus extensions) for filing a given year’s tax return.

Personal residence and other real estate

• Make your early January mortgage payment (i.e., payment due no later than January 15 of next year) in December so that you can deduct the accrued interest for the current year that is paid in the current year.
• Consider structuring the sale of investment property as an installment sale to defer gains to later years.
• Maximize the tax benefits you derive from your second home by modifying your personal use of the property in accordance with applicable tax guidelines.

Itemized miscellaneous and medical expenses

• Pay your 4th Quarter state estimated tax payments by December 31 instead of waiting until the January 15th due date to accelerate the tax deduction. Consider the same strategy for property taxes. Be mindful of the Alternative Minimum Tax (AMT) before employing this strategy.
• Maximize the use of itemized miscellaneous expenses and/or medical expenses by bunching such expenses in the same year, to the extent possible, to meet the threshold percentage of your AGI.

When it comes to the year-end tax planning related to your investments, there’s always a lot to think about. Your Bartlett wealth advisor can help you consider your tax situation, alongside your other advisors, to determine whether any year-end moves make sense for you.