End-of-Year Tax Tips: Do What You Can Before It's Too Late

Dennis G. Murray, MA


November 15, 2017

In This Article

Don't Get Too Aggressive

4. Defer Income to 2018

If reducing your tax bill is all about showing less income, then it makes sense to push as much income into 2018 as possible. Although this may not be an option if you draw a regular paycheck, if you're a doctor in private practice, you can defer some billings until January so that the payments don't show up in your corporate account until next year. Likewise, if you're scheduled to earn a bonus for 2017, it may make more sense to receive it in 2018.

Do you do any work on the side, such as reviewing records for insurance companies or serving as a medical director for a nursing home? If so, you may want to hold off on sending your December invoice until January. The same logic applies to any winning investments that you're thinking of selling: If there's no real compelling reason to sell, ask yourself whether you can wait until next year to make the transaction, when the gains will be taxable on your 2018 return.

But don't get too aggressive about deferring income, warn tax experts. You could wind up in a higher tax bracket next year and/or trigger additional taxes, such as the Net Investment Income Tax, which could ultimately offset any savings you may have enjoyed for 2017.

5. Consider Selling Any Losing Investments

Although no one wants to admit they made a bad investment, Uncle Sam will keep your secret if you decide to sell it this year for a tax deduction. This strategy, referred to as "loss harvesting," is subject to a number of restrictions—namely, you can't deduct more than $3000 in losses, which must first be used to offset your taxable gains.

Let's look at two examples. If Dr Smith has taxable gains this year of $4000 and sells a stock for a $3000 loss, he can write off $1000 on his 2017 return (the first $3000 of gains and losses essentially cancel each other out.) But Dr Richards, who has $15,000 in gains and $20,000 in losses, can deduct the full $3000 on her 2017 return and carry the additional $2000 over to 2018, where it's subject to the same rules.

A word of caution, though: Don't sell a losing investment simply to get a tax break. As many physicians have learned the hard way, it may make sense to hold onto a security that has fallen on hard times. A company's stock, for instance, may be part of a larger trend that temporarily finds it out of favor, rather than something specific that may warrant dumping it, such as poor management or a massive recall of a faulty product.

"With the market hitting new highs this year, there hasn't been much opportunity for tax-loss harvesting," says Dr Greenwald. Even in bull markets, he adds, investors should pay close attention to their holdings and watch for news or market dips that may make selling the best option. "It's popular to think of tax planning at year-end, but it's an activity that should go on all year. There's no reason not to take a tax loss in March or July if it's available and makes good sense to do so."


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