Tax moves you may want to consider before the end of 2017

Published: Wednesday, December 27, 2017 @ 11:50 AM

You probably already know that big changes in the tax code are going to take effect starting January 1, 2018.

What you may not know is that there are still a number of things you can do over the few couple of days to potentially leverage those changes to your own benefit. And there are other actions you can take over the coming year to take even greater advantage of the new tax payer rules.

Tax moves to consider making before 2017 is over — and some you might want to make in 2018

Alongside other changes, starting tax year 2018, the standard deduction for individuals almost doubles to $12,000 which is up from $6350 in 2017. Married couples will see their standard deduction rise from $12,700 in 2017 to $24,000 in 2018.

This means that even if you itemize in 2017, you may not be able to do so in 2018 unless your deductions exceed these higher thresholds. This isn’t necessarily bad because you’ll be able to take advantage of a larger standard deduction but it still makes sense to look at this further.

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Let’s take an example to really understand what’s going on:

Let’s say you file as an individual and your current itemized deductions are $7000. Further, let’s assume that you project your itemized deductions will remain at about the same level for the foreseeable future.

That being the case, it makes sense to crowd as many deductions as you can into 2017.

That’s because in 2018 (in this example) and thereafter, your standard deduction ($12,000) will be higher than your actual expenses ($7,000) so you probably won’t itemize after 2017.

You get a greater standard deduction but you won’t be able to take advantage of the expenses you would otherwise itemize unless you find a way to pull them into 2017. Here are a some ways to do that:

State and local taxes, sales tax and property tax

Starting in 2018, the most you’ll be able to deduct for state and local income tax, sales tax and property tax is $10,000.

 The new tax law doesn’t allow you to prepay 2018 state and local income taxes and deduct those expenses on your 2017 return. But you may be able to prepay your 2018 property tax early if your local tax collector allows it.

 And if the $10,000 cap impacts you, this is something to look into. Check with your local tax property tax collection office to find out how to get this done over the next few days.

Also, if you make quarterly estimated payments, you can make your fourth-quarter payment by December 31st rather than January 16th 2018 and deduct those payments in 2017. Talk to your CPA about this if they haven’t already reached out.

Bunch your charitable contributions

The only way you’ll be able to claim a deduction for charitable contributions is if you itemize your deductions. And since the threshold will be higher starting in 2018, it may be more difficult to do.

One smart tactic might be to make greater contributions to charities before December 31, 2017.

Going forward, you might want to bunch up your contributions in years where your total itemized deductions are greater than the standard deduction or simply make a greater charitable contribution every couple of years so you have a shot of meeting the threshold and writing them off.

Call your tax preparer this week

The new tax law does away with a number of deductions and credits but you might be able to still claim them in 2017 depending on your situation.

Ask your tax professional about prepaying unreimbursed job-related expenses and even tax preparation expenses. This is especially critical if you are an employee because deductions for job related spending and tax prep go away after December 31, 2017.

RELATED: Saving for education? The new tax bill changes a few things

Take advantage of lower tax brackets

One of the benefits of the new tax law is that rates are reduced for many tax payers.

If it looks like you are going to be in that situation, pull out all the stops to push as much income as you can into 2018.

This goes for bonuses, commissions and any other income you have the ability to recognize after December 31, 2017. One word of caution: Before doing this, examine your unique situation carefully. Study the old and new tax brackets.

If you’re going to have a banner year in 2018 and expect to land in a higher bracket, you might be better off by reversing this and shifting some of that income to 2017, if possible. Even though the rates are higher now than they will be next year, if you are going to earn significantly more money next year, it might work out better for you to declare some of that income in 2017.

Mortgage interest

If you are currently deducting interest expense on an existing mortgage you have, you’ll be able to continue deducting that cost because you’ll be grandfathered in. But if you take a loan after December 15, 2017 you’ll only be able to deduct the interest on the first $750,000 you borrow. The cap of $750,000 applies to loans on your first and second home – combined.

This means you might reconsider moving if that involves taking out a big mortgage.

Another possible fix would be to use assets to pay down your mortgage to the levels that you can use to write off interest for new loans. With the stock market at all time highs, that might be a good way to reduce your after-tax cost of a big mortgage and reduce your exposure to the market.

IRA conversion recharacterization

After December 31st, you won’t be able to recharacterize IRA conversions. That’s too bad but this probably isn’t something you’d consider doing this year anyway. Here’s why:

Normally, people are interested in having a “do-over” when it comes to their IRA conversion when the stock market takes a big hit after they convert. The logic is, if the value was higher when they converted compared to the current value, they would be paying taxes on money they really no longer have.

Having said that, 2017 was pretty good for stock market investors. The odds of you converting some time during the year and now towards the end of the year, the value being much lower are remote. So, it’s good to understand that recharacterizations aren’t going to be available going forward but it probably isn’t a big deal for you right now.

Pack your bags

I mentioned earlier that you will only be able to write off state, local and property taxes up to $10,000 per year. Again, you have to consider your own situation carefully, but this might make it worth your while to move to a state with lower income and/or property taxes.

Even if you don’t take this step, please know that some of your neighbors will. That could end up hurting property values in high tax states long-term. You might want to get ahead of that wave and get out while the getting is good.

Open up your side business

Hands down, there are a lot more goodies for business in this tax bill than there are for individual tax payers. This might be the perfect time to fire up a small business or side gig. Before doing so however, please make sure to seek out professional tax advice. The tax opportunities are potentially great but the tax changes are complex. Professional guidance can be worth its weight in gold.

The tax code is going to change dramatically in 2018. It’s important to understand what’s happening, make the new rules for you next year and take advantage of the old rules while you still can. The smartest thing to do is contact your tax professional, create a tax plan and execute it accordingly.

Understand that the rules could easily change again. The IRS code is not written in stone. That’s why it’s always important to stay well informed of the changes as they occur.

Neal Frankle is a Certified Financial Planner and Editor of

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Financial experts say you should do these things with your tax refund

Published: Thursday, February 22, 2018 @ 6:13 PM

‘Tis the season for taxpayers to get a nice chunk of change back from the IRS.

It’s tempting to spend it all, but financial experts say there are steps you should take to shore up your financial future. 

Some who usually pay off debt will splurge this year.

“I’m going to Japan in April so I’m actually going to add that to my travel fund, so I’m really excited about it,” said Olivia Morris from Centerville.

Those who used to spend their return? 

“I just plan to save it. We are about to start a family, so I plan on saving it for the baby,” said Toska Ivory of Dayton. 

It’s important to have a plan for tax return funds or any financial windfall, said Lisa Roberts, Graceworks certified housing and credit counselor.

Pay urgent bills first then save. 

“If it’s something that is urgent -- a bill that’s going to be a roof over your head, utilities, pay them,” said Roberts, “after that you definitely want to put it into savings.”

WalletHub has these additional tax refund spending recommendations:

  • Invest in an IRS or 529 savings plan for your child’s education
  • Refinance your home loan if you can get a lower rate
  • Increase your home’s value by doing some home improvement projects. 

As for splurging? 

“If you do have the funds to do that once all of your debts and things are paid- and saving- then by all means you’ve earned it,” said Roberts. 

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Getting a tax reform bill bonus? 5 things to think about

Published: Thursday, January 04, 2018 @ 11:05 AM

(AP Photo/Hillery Smith Garrison, File)
(AP Photo/Hillery Smith Garrison, File)

Many companies have announced they will provide first quarter cash bonuses to employees following last month’s passage of the tax reform bill.

» RELATED: What to expect from the new tax legislation

While some may see this as money to spend immediately, PNC offered five things to think about for how to use the funds:

  1. Pay Down Debt—during the holidays, people tend to overspend, with much of those purchases being placed on credit cards. In fact, early reports are that U.S. year-end holiday retail sales rose 4.9% compared to the same period last year. Credit cards can have high interest rates, so to help minimize this, you might consider using the funds to pay down credit card or other debt and start off the New Year in a financially responsible way.
  2. Start an Emergency Fund—a money market account and other appropriate short-term savings vehicles provide easy money management and FDIC protection to help you achieve your savings goals. A money market account may be comprised of short-term securities representing high-quality, liquid debt and monetary instruments.
  3. Increase Your 401(k) Contribution—a 401(k) is an employer-retirement plan that, if your employer offers one and you are eligible to participate, can allow you to invest part of your paycheck before taxes are taken out. Many employers will match a portion of your contribution to this plan, helping your contribution make even more of an impact on your retirement well-being.
  4. Invest in an Individual Retirement Account (IRA)—an IRA can allow you to invest for retirement on a tax-deferred basis and your contributions may be tax-deductible. The deduction may be limited if you or your spouse is covered by a retirement plan at work and your income exceeds certain levels. For 2017 and 2018, your total contributions to all of your traditional and Roth IRAs for the year cannot be more than $5,500 ($6,500 if you are age 50 or older) or your taxable compensation for the year if less. Roth IRA contributions may be limited based on your filing status and income.
  5. Add to Your Child’s 529 Plan—there is no better time than the present to invest in your child’s education and the new tax reform bill expanded the use of 529 plans to cover expenses for grades K—12. A 529 plan is a tax-advantaged investment designed to encourage saving for the future higher education expenses of your child or beneficiary. There are two types of plans: prepaid tuition plans that allow you to pay for tuition and fees at designated institutions in advance; and, savings plans that are tax-advantaged investment vehicles, which allow you to save for future education costs.


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New tax law: What you need to know from local accountants

Published: Thursday, December 28, 2017 @ 9:12 AM

Filers look for tax tips

With the recent tax changes, the usual end-of-year assortment of tax moves is likely more complicated in 2017.

These changes affect everyone from single mothers to millionaires to most sports fans who buy event tickets.

“I’d love to tell you that everyone has a handle on this,” said Mark Bradstreet, founder of the Bradstreet & Co. Inc. accounting firm, which has offices in Centerville and Xenia. “I’m not sure anyone does. I would be suspicious if someone said they did.”

Prominent among the changes: The 1,000-page legislation recently passed by Congress and signed by President Donald Trump caps at $10,000 the amount of state and municipal taxes that taxpayers can deduct from their federal tax bill.

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Some filers — those with high property tax bills who aren’t using the standard deduction — are scrambling to pre-pay property taxes for the coming year before the cap takes effect, according to national reports. In 2017, that deduction has no ceiling.

Sweeping tax overhaul was signed into law.

While the new tax bill lets local municipalities decide whether to allow taxpayers to pre-pay property taxes, it blocked filers from pre-paying local sales and income taxes.

Bradstreet said it’s OK to pre-pay real estate taxes for most taxpayers. Montgomery, Greene and Warren counties will allow filers to pay property taxes early, he said.

“They’re all more than happy to take your money,” he quipped.

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If you fall under the alternative minimum tax (AMT) — and if you don’t itemize your deductions — paying property property taxes early won’t help, Bradstreet said.

“For most people, though, it’s ‘no harm, no foul’ pre-paying it this year,” he said.

But an IRS announcement was triggering more confusion early Thursday.

In a notice, the IRS said pre-paying property taxes may work, but only under certain conditions. Real estate taxes may be paid in 2017, but the taxes must also be assessed in 2017. 

William Duncan, a certified public accountant with Dayton firm Thorn, Lewis & Duncan, said taxpayers should check with accountants to see if they will fall under the AMT in 2017.

Duncan called the tax changes “wild.” With newly lowered tax brackets and higher standard deductions, he said he has clients with seven-figure incomes who will opt to take the standard deduction this year instead of itemizing.

That’s the first time in his career he has seen that, Duncan said.

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The standard deduction for married individuals filing jointly is $24,000, noted John Venturella, a Dayton shareholder with Clark Schaefer Hackett.

“I think you are just going to see a lot of people using the standard deduction,” Venturella said.

The new law introduces some wrinkles for University of Dayton Flyers or other college and professional sports fans, too.

If you buy University of Dayton basketball tickets in the lower arena and pay for a seat license, current law lets you deduct 80 percent of that as a charitable deduction. That benefit is going away in 2018, Duncan said.

The university is inviting ticket-holders to pre-pay for seat licenses in 2017, Duncan said, which Adam Tschuor, associate athletics director for revenue and partnerships at UD, confirmed.

“It may be to your advantage to pay for next season’s ASP (Arena Seating Program) donation or beyond before Jan. 1, 2018,” the university said in a letter sent to ticket-holders just last week. “These payments would still be tax deductible under existing tax law.”

Tschuor said the university has always allowed fans to prepay their “ASP donation in all the way up to the conclusion of the announced ASP cycle.”

Another change: Your tickets for UD, Wright State, Ohio State or Cincinnati Reds or Bengals games will no longer be tax-deductible as a business entertainment expense.

“If you’re a businessperson and you want to take clients to the UD game next year, you’re not going to be allowed to take a tax deduction for the entertainment value of those tickets,” Duncan said.

For businesses, Duncan said it’s important this year to try to defer whatever income you can, push it to 2018, and pay the expenses you can in 2017.

Most accountants scoff at the notion, pushed by the bill’s proponents, that it has simplified the tax code. For higher-income earners in particular, as well as many small businesses, tax law remains at least as complex as ever. And the bill has injected a new layer of uncertainty because so many changes are temporary and could be reversed in a few years.

The Associated Press contributed to this story.

Donating to charities

December is a critical fundraising month for charities. Many people make year-end gifts for tax reasons, or to extend the spirit of Thanksgiving and generosity to those less fortunate. Here are a few dos and don’ts when it comes to charitable giving.

DON’T succumb to high-pressure, emotional pitches. Giving on the spot is never necessary, no matter how hard a telemarketer or door-to-door solicitor pushes it. The charity that needs your money today will welcome it just as much tomorrow – after you’ve had time to do your homework.

DO think before you give. If you are solicited at the mall or on the street, take a minute or two to “think.” Ask for the charity’s name and address. Get full identification from the solicitor and review it carefully. If you decide to donate, don’t give cash. Write a check made payable to the charitable organization, not an individual.

DO check out the charity carefully. Make sure you feel comfortable with how your money will be spent. Don’t just take the word of someone else; even good friends may not have fully researched the charities they endorse. Go to to verify that a charity meets BBB Wise Giving Alliance’s 20 Standards for Charity Accountability.

DON’T assume that only “low overhead” matters. How much money a charity spends on the actual cause – as compared to how much goes toward fundraising and administration – is an important factor, but it’s not the whole story. A charity with impressive financial ratios could have other significant problems such as insufficient transparency, inadequate board activity and inaccurate appeals.

SOURCE: Better Business Bureau

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5 fast facts that will help make filling out FAFSA a breeze

Published: Wednesday, December 13, 2017 @ 10:32 AM

The following points are what you need to know, as well as common mistakes to avoid when filling out the FAFSA Fill it out – you have nothing to lose The sooner you submit your FAFSA, the better Gather the information you'll need Watch out for common mistakes like leaving fields blank Keep an eye out for requests for more information

It's that time of year again when parents and college or college-bound students fill out the FAFSA (Free Application for Federal Student Aid).

The idea of wading through a form – especially one that requires financial information – is definitely not an appealing idea, but the FAFSA could be a tremendous help in getting your student money to attend college.

RELATED: 20 financial aid terms every college student and parent should understand

The following points are what you need to know, as well as common mistakes to avoid when filling out the FAFSA.

Fill it out – you have nothing to lose.

You may think that you don't need to fill out the FAFSA, especially if you believe you might not qualify for need-based aid. But there's no income cut-off point with federal student aid, according to the U.S. Department of Education. In addition, the FAFSA can help you qualify for all kinds of grants, loans and scholarships, including those offered by your state, school or private organizations.

By investing a few minutes of time, you could reap thousands of dollars in potential rewards.

Submit it ASAP.

The sooner you submit your FAFSA, the better, according to consumer adviser Clark Howard. Although the federal deadline isn't until June 30, 2018, you should check with the financial aid administrator at colleges you're interested in to make sure their deadlines aren't earlier.

Submitting earlier will help you plan how you'll pay for college. You'll also have a better chance of getting as much aid or scholarship money as possible since some colleges distribute their available money on a first-come, first-serve basis, Howard says.

Gather the information you'll need.

The FAFSA asks questions about the student as well as his or her parents if the student is a dependent.

You'll need the following information on hand as you fill out the FAFSA:

  • The student's Social Security number
  • The parents' Social Security numbers
  • Driver's license number (if you have one)
  • Alien registration number (if you're not a U.S. citizen)
  • Federal tax information for the student (and his or her spouse, if applicable) and the parents. This can often be imported online, so you may not need your records.
  • Information on the student's and parents' assets, such as money held in bank accounts and real estate holdings (not your primary residence)
  • Records of the student's or parents' untaxed income, such as veterans benefits and interest income

Watch out for common mistakes.

The National Association of Student Financial Aid Administrators points out some common mistakes that can delay your form's submission or cause you to not get the aid and scholarships you might qualify for. They include the following:

  • Leaving some fields blank – Instead, put in a "0" or "not applicable."
  • Listing an incorrect Social Security or driver's license number – It pays to recheck these numbers.
  • Failing to use your legal name – Use the name on your Social Security card, not a nickname.
  • Forgetting to list colleges – Even if you're not sure of which college you'll be attending, add any reasonable possibilities to the list of colleges that will receive your information. You're under no obligation to apply to or attend these colleges, and they can't see which other colleges you're interested in.

Keep an eye out for requests for more information.

Your FAFSA may be selected for verification, which means you'll have to provide some additional or supporting information, U.S. News & World Report explains. This process doesn't necessarily mean you've done anything wrong. You may have a discrepancy or mistake on your form, but some FAFSAs are just randomly selected for verification (lucky you!).

These requests will often come to the student's personal email account or university email address, so he or she will have to be diligent about checking it and responding to any requests by the stated deadline.


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