Trim Your Tax Bill

Some of these year-end moves will be even more compelling if lower rates arrive in 2018.

- Sandra Block

The outlook for tax reforms is still uncertain, but this much seems clear: Tax rates are unlikely to go up in 2018, and there’s a good chance that they’ll go down for most taxpayers. That makes some year-end tax strategies even more attractive this year than they’ve been in the past.

For example, many taxpayers make the bulk of their charitable contributions at the end of the year. But you may want to disburse some of next year’s generosity in 2017 because those deductions will be less valuable if you find yourself in a lower tax bracket next year. And even if rates remain flat, you’ll still get the benefit of taking a deduction sooner rather than later.

Don’t limit yourself to cash gifts. Many large charities accept donations of appreciated securities. If you’ve owned a stock or other security for more than a year, you can deduct its value on the day you make the donation. You won’t pay tax on the gain, and the charity won’t either. Another option is to donate appreciated securities to a donor-advised fund, which allows you to take the deduction on your 2017 tax return and distribute the funds later (see “Ask Kim,” on page 41).

Don’t have enough deductions to itemize? If you’re 70½ or older, you can donate up to $100,000 from your IRA directly to charity. The contribution counts toward your required minimum distribution and isn’t included in your adjusted gross income. That could qualify you for tax breaks tied to your AGI and reduce or eliminate taxes on Social Security benefits.