Year-End Tax Planning Strategies

You may be able to reduce your 2018 taxes if you act soon! Several year-end tax minimization strategies for individuals are presented here. Not all strategies may be appropriate for you so please seek professional advice prior to moving forward. This post reflects the laws in place as of September 1, 2018. It’s possible that the IRS may provide additional clarification regarding 2017’s tax reform or that Congress may make additional changes before the end of 2018.

Your federal tax situation may be different this year, due to the sweeping changes made to the federal tax code by the Tax Cuts and Jobs Act of 2017.

The tax rates on ordinary income are lower this year. The standard deduction has nearly doubled. Personal exemptions have been suspended. A new 20% deduction on pass-through income is available to some business owners. The child tax credit is available to more families, including some upper-income ones. The exemption for the federal gift and estate tax has doubled. These changes and others went into effect on January 1, 2018 and are scheduled to remain in place through 2025.

What can you do in light of these changes to improve your tax situation and potentially reduce your 2018 federal taxes? Plenty.

Check your tax withholding. With so many changes to the federal tax code, the number of withholding allowances you claimed the last time you filled out a Form W-4 or a Form W-4P may no longer be appropriate for you. The IRS is encouraging taxpayers to check whether the amount of tax being withheld from their paychecks, pensions, and annuities is accurate. One way to check is with the IRS’s withholding calculator located online at

Given all of the changes, it might be a good time to have a tax projection completed prior to year-end so that you can estimate your 2018 tax liability. This way, you will know if it looks like not enough tax has been withheld, and you can avoid a penalty on the underpayment by increasing the amount of tax withheld from your paycheck or bonus to make up the shortfall before the end of the year.

Shift income into the more advantageous year. Do you expect to be in a different tax bracket next year? If you do, shifting some income into the year when you will be in the lower tax bracket may help you lower your taxes over the two-year period.

If you expect to be in the same tax bracket next year, it is generally a good idea to defer income and the taxes on it into next year.

Although it may not be possible to control when you receive certain types of income, such as your paycheck, you may be able to time your income somewhat by selling appreciated assets and making withdrawals from your tax-deferred retirement accounts in years that are more advantageous tax-wise.

Consider converting your tax-deferred retirement accounts to a Roth IRA. With the current low tax rates, you may pay less tax on a Roth conversion now than you might later on if tax rates are allowed to increase to pre-2018 levels after 2025.

With all of the tax law changes that have occurred there is no better time than now to re-evaluate your personal finances.

Copper Leaf Financial is a fee-only, fiduciary firm and we can help you by providing advice on all financial matters. With offices in Williston and Rutland, Vermont, we develop a customized wealth management (financial) plan designed to integrate every aspect of your financial life. This is "true wealth management" - a holistic, all-encompassing approach that goes beyond just investment advice. Call us today at (802) 878-2731 to schedule a strategy session and begin building your road map to financial success.

Article published in Copper Leaf Financial publication Eye on Money - November 2018 issue.