Published December 14th, 2016
Lynn's Top Five
By Lynn Ballou
Lynn Ballou is a Certified Financial Planner. The review, assessment, and/or opinions expressed in this column are limited to and in association with general financial planning subjects. They are intended to introduce the reader to a general financial planning topics. This column should serve as a tool that should assist readers in the development of subsequent discussions with a financial planning professional. Always consult an accountant and/or attorney to assess your individual situation prior to implementing any financial planning strategy, including any strategy directly or indirectly referenced in this column.
Usually my year-end column focuses on last minute tax planning considerations. And this year is no different - but with a twist. And that twist is to think about year-end tax and other planning moves you should consider in light of the election, with the legislative and executive branches under the control of one party - a party which proposes major change. So here are some tax and other year-end planning thoughts in light of what may lie ahead.
1) Defer income, accelerate deductions: Classic year-end advice, right? Well this year it may be more important than ever. A major platform for the Republicans was tax reform and all the proposals involve some sort of lower taxation in 2017. If you feel that your tax rates will in fact decrease next year, you may want to consider moving any income you can to 2017. You would then want to realize all the tax losses this year that you intelligently can to offset income, as this may prove to be the higher tax rate year.
2) Refinancing and Other Debt Moves: U.S. interest rates may rise soon and quickly, so if you've been meaning to refinance your home, don't delay. Similarly if you have been considering borrowing money for other purposes such as expanding your business or refinancing other debt, your window to today's historically low rates may be closing soon. Some tax reform proposals involve reducing the amount of debt you can deduct under different scenarios. If you are going to be stuck with interest on loans which under potential new laws won't be deductible, at least refinance that debt now to the lowest possible cost you can so you aren't adding insult to injury.
3) Debt Instruments in my Portfolio: Spend time reviewing your holdings. Indications from the Federal Reserve are that rates will be increased in December and possibly again multiple times next year. If rates go up rapidly, the value of some holdings in your current income generating portfolio might be negatively impacted. Pay attention to the credit quality and duration of your portfolio holdings. Just as with equities, a diversified, laddered portfolio of very high quality debt instruments may be attractive.
4) Year-end Gifting of Appreciated Assets: Since a sale of appreciated assets might be taxed at higher rates this year than next, you should consider gifting mutual funds, stocks or other assets which, if sold, would cause you to pay sizable tax on gains. You have time before year-end to work with the current custodian of your publically traded assets to gift these to qualified charities. Even as little as $1,000 donation to a food bank, for example, if done with low basis stock or mutual fund holdings, will have an impact.
5) What's YOUR AGI?: The amount of your Adjusted Gross Income (AGI) can affect many calculations on your tax return including various itemized deduction thresholds. Take a look at each line on your 1040 page 1 to see what you might be able to impact to get that AGI lower. A few to think about include deferring bonus income, increasing deferred compensation, billing next year instead of this year, fully funding your retirement accounts, taking your RMD as a charitable contribution and increasing year-end spending for business equipment.
Many things can be said about the election and what's to come, but boring isn't one of them. Stay tuned in and on top of change as it's bound to impact you in one form or another. Being informed and collaborating with your trusted professionals will matter more now than ever.

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