3 Questions to Ask Your CPA Before Year-End

3 Questions to Ask Your CPA Before Year-End

If you’ve been watching or reading the news this week, it appears that the GOP tax bill will likely be signed by President Trump in the coming days. This has prompted many conversations in our office around what we can do to help our clients take advantage of the impending changes in our tax legislation. Each year, the Highland team takes a proactive approach to ensure we are in close communication with our clients’ CPAs and implementing strategies when deemed appropriate from both a financial and tax planning perspective. We thought it would be beneficial to share a few of the topics we’ve been discussing.

Note: Because these strategies are dependent on each individual’s unique tax situation, as well as what is actually signed into law, we want to emphasize the importance of your discussing them with your CPA.

  1. Would I benefit from making any charitable gifts before the end of the year?

Due to lower proposed tax rates next year, you should consider making a larger charitable gift this year. For example, the top tax rate drops to 37% vs. 39.6% today, which means you may receive a larger deduction by gifting this year. Keep in mind that itemized deductions are phased out after a certain level of income this year but not next year. While both the phase-out and AMT considerations complicate the decision, your CPA can tell you if a larger gift this year makes sense.

For lower-income individuals who don’t have much in itemized deductions, it will generally make sense to lump charitable contributions into one year vs. doing annually. You can easily do this by opening a Donor Advised Fund and then using the fund to make grants annually instead of personal charitable contributions.

  1. Should I take advantage of SALT (state and local tax) deductions?

Yes, especially if in a high-tax state such as California or Oregon. Next year, if the tax bill passes, you will only be able to deduct $10,000 in combined state income tax, sales tax, or property tax. Therefore, it will usually be advantageous to pay any taxes you can before 12/31. You can’t prepay 2018 taxes, but you can prepay 2017 state taxes that are not due until 2018. Likewise, if you are planning to make a big purchase (i.e. car), do it this year vs. next year. Keep in mind that if you are subject to AMT, paying these taxes early may not be beneficial, so check with your CPA.

  1. Should I defer income until next year?

Yes, to the extent rates will likely be lower, but it also depends. If you are in a low tax bracket in 2017, it could make sense to do a partial Roth conversion or actually harvest gains. Tax planning is about lowering tax rates over time, not just paying the lowest amount of tax in a given year. As an example, if you have a large IRA and are in your 60s, you may want to partially convert some of it to a Roth IRA and pay more tax now. Why? When you are over 70, you’ll have to take required minimum distributions, and this could put you into a much higher tax bracket. Likewise, lower-income taxpayers should take advantage of 0% capital gain rates whenever possible.

Other notable changes:

  • Estate Tax Exemption raised from $5.43M to $11.2M for individuals and $22.4M for couples.
  • Re-characterization of Roth Conversions will no longer be allowed.
  • 529 plans will be able to be used for private school & home school expenses.
  • Investment advisory and tax prep fees will no longer be deductible.


Please keep in mind that we’ve only outlined a few of the year-end tax planning strategies that may be available to you based on the assumed changes. We encourage you to contact your CPA who will be able to help you best determine how these changes will affect you.

Ben Johnson
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