Advertisement
taxes

5 Ways to Build A Better Tax Plan for 2017

Taxes may be inevitable, but they're also something you have some power over. Here are five strategies to manage your tax burden going forward.

You just finished your 2016 taxes, but it’s not too early to make plans for 2017. As a CPA, financial adviser and former IRS agent, I see a lot of financial plans that don’t consider tax efficiency.

It’s important that as you build your plan, you think about some strategies to reduce or defer your taxes now or in the future. Here are some strategies to consider:

1. Tax harvesting

Usually, this strategy is implemented near the end of the calendar year, but it can be done at any time. With tax-loss harvesting, you sell off holdings that have a loss position to offset the gains you’ve experienced from other sales. The asset you sold is then replaced with a similar investment to maintain the portfolio's asset allocation and expected risk and return levels. It won’t restore your losses, but it can ease the pain.

2. Using long-term gains and the 0% tax rate

For those who fall within the 15% tax bracket, your long-term gains are tax-free. Make it a habit to project your taxes and to look for tax opportunities every year as part of your plan.

3. Making IRA contributions

You have until April 17 of 2018 to make a Roth or traditional IRA contribution for the 2017 tax year, but why put it off? In fact, ou could even use your income tax refund to fund it. Remember, a Roth creates tax-free income in the future, which is worth its weight in gold.

4. Using the “backdoor” Roth

Some people make too much money to contribute to a Roth IRA or to take a deduction on a traditional IRA. But you still can make a contribution to a traditional IRA without the deduction and later convert it to a Roth. There’s no tax due, except on growth in the account that you earn between the time of the contribution and the conversion. If you hold money in a traditional IRA for a short time only, the growth — and the resulting tax — should be small.

5. Exploring financial vehicles that can defer taxes on dividends, interest and capital gains

Tax deferral allows you to employ the triple compounding effect: It pays interest on the principle, interest on the interest and interest on the taxes that you would have paid if you were in an investment that was taxed annually.

Advertisement
Advertisement - Article continues below
Advertisement - Article continues below

In 2017 — or any year for that matter — don’t wait until the end of the year to think about the moves that could save you on your tax return. Get together with your financial adviser or tax professional now to discuss a plan that will help you succeed in your goals.

Kim Franke-Folstad contributed to this article.

About the Author

Chris Harlow, CPA, Investment Adviser Representative

Vice President, NW Tax and Wealth Advisory Group, Inc.

Chris Harlow is a Certified Public Accountant, Investment Adviser Representative and licensed insurance professional with NW Tax & Wealth Advisory Group, Inc. serving metropolitan Portland and southwest Washington. He is also the company vice president and holds his Series 65 securities license and life insurance licenses. Prior to joining the group, Harlow worked for the Internal Revenue Service for nearly 10 years.

Advertisement

Most Popular

12 Tax Deadlines for July 15 (It's Not Just the Due Date for Your Tax Return)
tax deadline

12 Tax Deadlines for July 15 (It's Not Just the Due Date for Your Tax Return)

Between due dates for IRA or HSA contributions, paying estimated taxes and other deadlines, there's more to do by July 15 than just filing your federa…
July 10, 2020
Know Why Your Credit Score Changes: 9 Money Moves to Consider
credit & debt

Know Why Your Credit Score Changes: 9 Money Moves to Consider

Your credit score is a key indicator of your financial well-being and of the risk you pose to lenders. How good is yours?
July 10, 2020
65 Best Dividend Stocks You Can Count On
stocks

65 Best Dividend Stocks You Can Count On

These 65 Dividend Aristocrats are an elite group of dividend stocks that have reliably increased their annual payouts every year for at least a quarte…
July 8, 2020

Recommended

12 Tax Deadlines for July 15 (It's Not Just the Due Date for Your Tax Return)
tax deadline

12 Tax Deadlines for July 15 (It's Not Just the Due Date for Your Tax Return)

Between due dates for IRA or HSA contributions, paying estimated taxes and other deadlines, there's more to do by July 15 than just filing your federa…
July 10, 2020
Saver's Credit: A Retirement Tax Break for the Middle Class
Tax Breaks

Saver's Credit: A Retirement Tax Break for the Middle Class

Your retirement contributions could be the key to a lower tax bill.
July 9, 2020
8 Ways You Might Be Cheating on Your Taxes
taxes

8 Ways You Might Be Cheating on Your Taxes

Don't fall into these common traps that can get you in hot water with the IRS.
July 8, 2020
2020 Tax Deadline: When Are Tax Returns Due This Year?
tax deadline

2020 Tax Deadline: When Are Tax Returns Due This Year?

The April 15 deadline for filing your 2019 federal income tax return (and paying taxes) has been moved back...but the new due date is approaching fast…
July 8, 2020