End-of-the-Year Tax and Financial Planning

Oct 2017


It’s hard to believe that there are only a couple months left in 2017. It’s amazing how fast time goes. This is a reminder that if there are things from a financial standpoint that you need to do before the end of the year, the clock is ticking. In doing any year-end planning whether it’s tax planning or just pure financial planning, always remember that just because the advice works for 99 percent of the people doesn’t necessarily mean it will work for you. The key is to always look at your individual situation and make decisions that are good for you and only you.

One of the things that you may want to consider before the end of the year is converting existing traditional IRAs into Roth IRAs. This strategy may cost you money up front, but could be a substantial long-term savings. One of the benefits of a Roth IRA is that the money grows tax free versus tax deferred in a traditional IRA and in addition, money in a Roth IRA is not subject to the 70½ required minimum distribution rules. Anyone can do a Roth conversion, income is not an issue. In addition, even if you are taking required minimum distributions, you still can do a Roth conversion. You cannot convert your required distribution but you can convert anything over that amount.

For those who are over 70 ½ and required to take distributions from their retirement accounts, if you have not taken your distribution and you are charitable in nature, you may want to consider donating your required distribution to a qualified charity. This transaction can be a substantial tax saver, particularly for those who do not itemize their deductions. In addition, by donating your required distribution to charity, you may find it has a positive effect on your Medicare B premiums, as well as how much of your social security is subject to tax.

Some flexible spending accounts have to be used before December 31st or you lose the money. Therefore, it you have a flexible spending account at work it’s important to understand the terms and if your account must be used before December 31st, you don’t have much time. The rules regarding flexible spending accounts and what the money can be used for are generous. Therefore, you still have time to be productive with the money as opposed to just throwing it away.

For some taxpayers, accelerating deductions into 2017 or deferring deductions to 2018 makes sense; it all depends upon your individual situation. Generally, if you itemize your deductions, it makes sense to accelerate any deductions into this year while on the other hand, if you are going to take the standard deduction this year, it generally makes sense to defer those deductions into next year.

One note regarding year-end tax planning and that is I would not take into consideration the new proposed tax law. We all know how dysfunctional Washington is and therefore, there is no guarantee that what the President proposes will become the law. Or, even if the law is passed, when it will take effect. In addition, we all know how the last minute wheeling and dealing in Washington can change the law dramatically. Therefore, my advice is to focus on what the law is today, not what is proposed.

Good luck!


If you would like Rick to respond to your questions, please email him at Rick@bloomassetmanagement.com.