I spend a small amount of time in November using a tax calculator to fill in the blanks for my tax liabilities that will come due in April of 2018. I do this prior to the end of the tax year (Dec 31, 2017), but also before Capital Gain distributions are executed. I find this important because end of the taxable investments decisions (the decision to buy or sell prior to or after a capital gain distribution) often need to be decided in early December. There is also the consideration of tax harvesting losses from poorly performing investments. Finally, contribution considerations to IRAs can add another layer of tax implications, but at least these decisions are afforded a few extra months (tax deadline/April of 2018).
Note: If you do decide to add to an IRA for 2017 (between Jan1 and the tax deadline) be sure that the contribution is coded for the correct year.
Here is the Tax Calculator I have found helpful and wondered if other have similar strategies for preparing to prepare your tax return.
taxcalculator.org/federal-tax-calculator.aspx
Comments
Have you concerns about placing your private data into an online calculator?
http://www.taxcalculator.org/privacy.htm
Another approach would be to input 2017 data using 2016 tax software (loaded on you computer off line) to approximate your 2017 taxes. Valid concern in today's day and age.
Regards,
Ted
1. Check 2017 tax folder to make sure nothing has been left out. Morgan Stanley's year end statement, 403(b) statement, social Security info, 1040 (part-time job), and other necessary material.
2. Give wife a kiss, and tell her I'm going to see Bill our tax man.
3. Drive about 15 miles to Bill's office.
4, Have a conversation on how much I'll owe Uncle Sam based on past returns.
5. Confirm he will call me when returns Fed. & IL. State are finished, and I can pick them up.
6. Write $250.00 check for his services.
Regards,
Ted
This gets me accurate figures for 2017 (since I update exemptions, thresholds, etc.), and lets me cross reference investment data (including YTD totals and estimated cap gains and other distributions that I update periodically).
Finally, it also has the benefit of enforcing discipline. It helps me understand all the moving parts. Then, when I finally do use tax prep software, I know that if it doesn't come out the same as my spreadsheets, I've forgotten something on my tax returns, not in my spreadsheets.
The online tax calculator is a nice first pass. It does omit lots of details (by design). For example, income from national muni funds is federally exempt but usually state taxable (at least in part). The reverse is true for savings bond interest.
Article:
here-are-the-best-ways-to-reduce-your-tax-bill-this-year-2017
Other tax Guy Articles:
https://marketwatch.com/topics/columns/tax-guy
The federal income-tax rate on this year’s long-term capital gains and dividends is still 0% for gains and dividends that fall within the 10% or 15% rate brackets (see the table below for the 2017 brackets). While your income may be too high to take advantage of the 0% rate, you probably have loved ones who can benefit. If so, consider giving them some appreciated stock or mutual fund shares. They can sell the shares and pay 0% federal income tax on the resulting long-term gains. Remember: the gains will be long-term as long as your ownership period plus the gift recipient’s ownership period equals at least a year and a day.
How does one go about giving MF shares to love ones ?
Derf
I noticed that paragraph as well...
Just typing out loud here, but Mutual Fund shares can be moved "In Kind" within your own accounts with the cooperation of the fund company. I have done this between different IRA accounts. Whether this is permissible between taxable accounts held by different owners I can't say. I have had no personal experience...keep us posted.
Some here at MFO have mentioned this other "in Kind" strategy to gain access to closed Mutual Funds:
Where an "In Kind transfer" is arranged (from one individual to another) for access to closed mutual funds. Once the few transferred shares were transferred "in Kind" into the new account the previously closed Mutual Fund became available (to add to) by the receiving party.
Derf
If you move shares from one owner to another, you may be liable for gift/estate taxes for transfers over $14K ($15K in 2018).
That's likely not a concern these days a the federal level. The current Federal estate tax exemption is $5.49M/person (and portable between spouses), even before "tax reform". Anyone for whom federal estate taxes is a concern is almost surely working with a CPA on tax shelters anyway.
But it may still be a concern at the state level. For example, Massachusetts has an exemption of "just" $1M, and no portability. Not hard to hit that figure including a home, especially in some parts of Boston.