Planning for the Future


Profitable Lessons from a Tax Return

Before filing away your 2017 tax return, ask yourself if you can learn a few lessons — and possibly make 2018 a better year financially.

Did I receive a large refund? If so, you made an interest-free loan to the IRS.  Ask your tax adviser to calculate the amount you need to pay in withholding and/or estimated tax payments to avoid any penalty.  This is especially important since tax rates have dropped for 2018.

Do I have significant capital gains or losses? Even in a bull market there are stock losers.  Offset some capital gains by selling shares that have dropped in value.  And remember: You can give appreciated stock held more than one year to charity and avoid all capital gains while also qualifying for an income tax charitable deduction.

Should I add municipal bonds to my portfolio? Although the return on municipal bonds is generally lower than that on commercial bonds, the tax-free income may make them an attractive investment, particularly if you are in a high tax bracket.  For example, a municipal bond paying 3% is equivalent to a 4.6% taxable return for a taxpayer in the 35% tax bracket.  There may also be state tax savings.

Are my investments producing more income than I need — or want? By making a gift of income-producing assets, you can shift the income to family members in lower tax brackets.  You can give up to $15,000 free of gift tax in 2018 ($30,000 for married couples).  Or you can give the assets to charity and also reap an income tax charitable deduction if you itemize.