Year-End Tax Strategies, Part 2

written by Jay Logal

With the lowering of the tax rates and other changes, our recommendation as a general plan of action is to defer income to 2018 or increase expenses for 2017. General tax strategies to accomplish this goal include: Cash basis businesses do not report income till it is received, nor do they report expenses till they are paid. With this in mind, consider delaying billing customers till early next year or late enough this year to ensure receipt of payment will happen in 2018.

Accelerate payment of expenses. Pay invoices now even thought they may not be due till 2018. Accrual basis businesses have a more difficult time influencing the timing of receipts. One way might be to delay the completion of a project so the right to the income passes to 2018. We recommend coordinating with your customer to avoid any customer dissatisfaction. If you have a need for equipment, items placed in service after September 27, 2017 qualify for the 100% bonus depreciation expensing. The requirement for original use is eliminated so used equipment would also qualify.

With the increase in the standard deduction and the limit on state taxes (income and property) an individual should consider making their fourth quarters estimated state income tax payment before the end of 2017. Congress will not allow prepaying the 2018 income taxes. If you are subject to the alternative minimum tax, you may not see a benefit from this strategy. Consider making your 2018 charitable contributions in 2017.

Charitable donations will continue as itemized deductions after 2017, but you may lose the benefit of them with the increase in the standard deduction. Payment of these items with a credit card count as being made. If you converted an IRA to a ROTH in 2017 consider unwinding the conversion and redoing the conversion in 2018. Due to the increase in the alternative minimum tax exemption amount consider delaying the exercise of any incentive stock options. We will continue to address other long-term strategies such as C-Corp vs S-Corp, converting from accrual basis to cash basis, the dates that several of these changes sunset and revert in future articles.

Please contact us if you have any questions 417-881-0145.