Filbrandt Reports

6 Year-End Strategies to Minimize 2017 Tax Exposure

Volume 17, Issue 14



Executive Summary:

This report outlines year-end tax strategies you can implement prior to December which will reduce your tax liability for tax year 2017. 

These strategies include:

  • Utilize “lazy money”
  • Reduce taxable income
  • TIAA Traditional
  • Payroll deduction Roth
  • Donate, don’t sell, stock
  • College savings w/529

Consider These Ideas Before the End of December

This report focuses on year-end tax strategies we recommend you implement before December. By then, it will probably be too late to reduce your exposure for tax year 2017. Our Chairman of the Board, Michael Filbrandt, likes to say, “It’s not how much money you make, it’s how much you keep.” These recommended strategies are offered with that premise in mind.

1. If you aren’t putting the maximum amount possible into your university retirement plans, we recommend using some of the “lazy money” sitting in your bank accounts to maximize your investment in these plans before the end of the year. Maximizing investments in retirement plans will reduce your take-home pay, so the “lazy money” earning nearly zero percent can be used toward some of the day-to-day expenses currently covered by your paycheck.

2. If you are Medicare-eligible and taxable income is too high, you might face an increase in your Medicare premiums next year. Maximizing investments in retirement plans is a way to reduce your taxable income. Plans you should investigate if you are not already in them include your university’s 403(b) or 457 plans.

3. One way to avoid a drop in your stock values if the market corrects is to convert at least some of those assets to an investment in a TIAA Traditional annuity, available through most universities. It offers a guaranteed rate of return and also guarantees your principal.

6 Year-End Strategies to Minimize 2017 Tax Exposure

Consider a Charitable Stock Donation

4. If you decide to move from stocks into TIAA Traditional, analyze your current stock portfolio. If you sell stocks that have appreciated greatly over time, you will pay substantial capital gains tax. A way to avoid that is to make a charitable donation of your stock. You will receive the tax benefits of the value of your donation, without any capital gains tax to pay. Then the charity can sell the stocks without any tax liability.

5. Investigate whether or not your university offers a payroll deduction Roth IRA. For many university professionals, it may be their only opportunity to contribute to a Roth IRA due to the salary limitations on those who can open traditional Roth accounts outside of the university. For the plans within a university, there is no income limitation, and up to $24,000 per year can be contributed. The primary objective of a Roth account is a tax-free source of income at retirement.

This is another scenario in which using your “lazy money” to pay for day-to-day expenses that would normally come out of your paycheck might make sense. Having a portion of your earnings go into a Roth account puts those funds to work in a beneficial long-term way. Using lazy money can offset that reduction in current payroll.

6. If you are saving for college, by all means, make sure you are doing so in a 529 plan. Some people are concerned that funds put into a 529 plan can only be used for college costs. But in a situation in which due to unforeseen circumstance, you would need the money in the 529 plan for some other expense, the worst case scenario is that you would pay income tax on the capital gains, along with a 10 percent penalty.

A 529 plan is the only investment in which you receive a tax deduction going in, it grows tax-deferred, and you also receive a tax-free withdrawal on qualified expenses.

By Michael Filbrandt, CLU®, ChFC®, and Scott Kornstedt, CFP®, CLU®, ChFC® Copyright ©2017, all rights reserved

Disclosure: To the extent that the information contained herein contains federal or state tax  issues, such information was not written or intended to be used, and cannot be used, for (1) avoiding federal or state tax penalties or (2) promoting, marketing and recommending to another party any transaction or matter addressed herein.


Volume 17, Issue 14

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