APRIL 2017

© 20 18 SUMMIT PLACE FINANCIAL ADVISORS 1

IT'S TAX TIME: HERE ARE FIVE TAX MANAGEMENT TIPS

LIFESTYLE AND LEGACY PLANNING

As the April 17th filing deadline approac hes, c onsider these strategies to

minimize your tax liability.

It's tax season! At the beg inning of eac h new year, Americ ans sta rt to get their

information together in p repara tion for the April 17th filing dead line. Many Americ ans

go to a p rofessiona l ac c ounting firm while millions of others c hoose to p repare and file

their own tax returns. No matter wha t your approac h, we have c omp iled five of our

favorite tax saving stra teg ies tha t app ly to most tax payers regard less of their inc ome or

age. Some of these may still be help ful to you before you file this year. Others will help

you be in a g rea t position next year even with the many c hanges of the new Tax Cuts

and Jobs Ac t (TCJA).Of c ourse, sinc e everyone has their own uniq ue c irc umstanc es,

make sure you a lways c onsult a tax p rofessiona l to determine whic h tac tic s will work for

you.

Our favorite tax management strategies:

1. Save for retirement2. Consider other deduc tib le ac c ounts3. Donate to c harity4. Harvest investment losses5. Bunc h itemized expenses

2 IT'S TAX TIME: HERE ARE FIVE TAX MANAGEMENT TIPS

1. Maximize Your Retirement Savings

Saving for your future is more important than ever with pensions and soc ia l sec urity under c onstant p ressure. By putting money into a retirement ac c ount suc h as a 401(k), you c an save on taxes today while a lso saving for the future. A 401(k) c ontribution b rings doub le tax advantages by reduc ing your c urrent taxab le inc ome and a llowing the funds in the p lan to g row tax-deferred for many years. Add itiona lly, many emp loyers p rovide a matc hing c ontribution to your own. Tha t?s a tax-deferred 100% return on your c ontribution in the first year!

You may c ontribute up to $18,500 to a 401(k) in 2018. For those who a re age 50 or older, you c an take advantage of an add itiona l $6,000 c a tc h-up c ontribution to your p lan to a llow you to save even more - up to $24,500 per year - and reduc e your annua l taxab le inc ome even further. All c ontributions a re deduc ted p re-tax from your wages.You will have to pay taxes on these funds eventua lly but not until you a re over 70, or you sta rt withd rawing the funds. Onc e you beg in to withd raw funds, your withd rawa ls will be taxed a t your ord ina ry inc ome ra te.

An IRA is another retirement savings ac c ount whic h p rovides tax b reaks for those who c ontribute; the d ifferenc e is tha t an IRA is opened on your own ra ther than through your emp loyer. More importantly, you c an c ontribute to an IRA a ll the way up until the annua l tax-filing dead line and still take a deduc tion if you q ua lify. This year tha t will be April 17th. This year you c an c ontribute up to $5,500 into an IRA or up to $6,500 with a c a tc h-up c ontribution of $1,000 if you a re a t least 50 years old . There a re inc ome limits tha t a ffec t the tax deduc tib ility of your c ontribution, but even a fter-tax c ontributions have the advantage of g rowing tax-deferred into the future.Any c ontribution today will save you on taxes one day and help build for your retirement.

2. Consider Other Deduc tib le Ac c ounts

Flexib le Spending Ac c ounts: Many emp loyers offer flexib le spend ing ac c ounts a t work for a va riety of expenses suc h as med ic a l expenses or c hild c a re. Money c ontributed to these ac c ounts goes in p re-tax, reduc ing your reported taxab le wages. La ter, when you need the money in these ac c ounts for q ua lified expenses, the withd rawa ls a re c omp letely tax-free.Many emp loyers offer flexib le savings p lans for non-c overed hea lth c a re expenses suc h as deduc tib les, eyeg lasses or a lterna tive hea lth and c ounseling servic es tha t may not be c overed under

your trad itiona l med ic a l p lan. If you have a high deduc tib le med ic a l p lan, you c an c ontribute p re-tax money to a Hea lth Savings Ac c ount (HSA) as well. In 2018, you will be ab le to c ontribute up to $3,450 to an ind ividua l ac c ount or $6,900 to a family ac c ount. Both HSA and flexib le spend ing ac c ounts c an be used for out-of-poc ket hea lth expenses.

A flexib le spend ing c hild c a re ac c ount offers the opportunity to use p re-tax inc ome to offset a signific ant expense for many peop le. These funds c an be used to pay for day c a re, a fter-sc hool p rog rams and even, sometimes, summer day c amp. For any flexib le spend ing ac c ount, be sure to c a refully estima te your known expenses for the year, as you must use a ll of the money in these ac c ounts eac h year or forfeit it.

529 Educ ation Plans:Depend ing on wha t sta te you live in, a c ontribution to a 529 educ a tiona l savings p lan might p rovide a sta te tax deduc tion while saving for your c hild?s educ a tion.Sta rting in 2018 under theTCJA, 529 funds c an be used both for c ollege and to pay up to $10,000 per year of K-12 educ a tion expenses. Not every sta te offers a tax deduc tion for these p lans and there is no federa l deduc tion, but your investments g row tax-free eac h year. Even more va luab le, q ua lified withd rawa ls a re a lso c omp letely tax-free.When making an annua l c ontribution, keep in mind tha t the deposit c ounts toward your annua l tax

Retirement ac c ounts make the most

of tax advantages by reduc ing your

c urrent taxab le inc ome and a llowing the

funds to g row tax-deferred .

© 2018 SUMMIT PLACE FINANCIAL ADVISORS 3

exc lusion g ift to the benefic ia ry. Tha t means, if you c ontribute $15,000 to your c hild?s 529 ac c ount, you c an?t make any other tax-free g ifts to them in the year.Always c onsult a tax p rofessiona l and c hec k your loc a l sta te laws to determine if a 529 ac c ount makes sense for your uniq ue c irc umstanc es.

3. Donate to Charity

Charitab le g ifts a re another way to reduc e your annua l taxes as well as reduc e a g rowing esta te. As long as you itemize your taxes, your c haritab le g ifts c an be deduc ted from your inc ome. Though most c haritab le c ontributions a re c ash, you c an a lso dona te goods or investment sec urities. When you dona te apprec ia ted sec urities to a c harity, you benefit in two ways: You c an deduc t the c urrent market va lue of the stoc k as a c haritab le g ift and you won?t have to pay c ap ita l ga ins taxes on any apprec ia tion you have had in the stoc k. This makes apprec ia ted investments an idea l sourc e for c haritab le g ifts.

If you a re not sure wha t c harity you want to support, but you want to take an annua l deduc tion, you might c onsider opening a Donor Advised Fund . For the year you c ontribute to the fund , you c an take a c haritab le tax deduc tion. Then you c an take your time determining whic h c harities you would like to support with a dona tion in the future. As the funds stay in the ac c ount, they a re invested and g row to offer even more support to your c harities of c hoic e.

If you a re over 70 and a re req uired to take d istributions from your IRA, c onsider using these funds for your c haritab le p lans. Up to $100,000 per year of your req uired d istribution c an be transferred d irec tly to c harities to avoid a taxab le withd rawa l. Using these funds for your c haritab le g ifts will not result in a tax deduc tion, but you c an avoid paying ord ina ry inc ome taxes tha t would otherwise have to be pa id on the req uired annua l d istribution.

For 2018, there have been c hanges to the limita tions on annua l c haritab le deduc tions. If your annua l dona tions exc eed the limits, however, you c an still c a rry forward the g ifts for up to five years. Be sure to c hec k with your tax p rofessiona l to determine your persona l limit and how best to support the c harities you c hoose.

4. Harvest Investment Losses

Another sourc e of potentia l tax savings might be found in your investment portfo lio. Dividends, interest inc ome and c ap ita l ga ins/ losses a re a ll pa rt of your

annua l tax c a lc ula tions. To help minimize taxab le d ividend and interest inc ome, your investment p rofessiona l c an struc ture your portfo lio to maximize tax effic ienc y between your taxab le and tax-deferred ac c ounts emphasizing taxab le inc ome sourc es in your tax-deferred retirement ac c ounts.

Ga ins on apprec ia ted sec urities tha t a re sold fa ll into two c a tegories; those owned less than a year a re short-term ga ins and a re taxed a t your ord ina ry inc ome tax ra te. Investments tha t a re held longer than one year a re taxed a t a lower c ap ita l ga ins ra te. You c an save substantia l taxes by keep ing trac k of how long a sec urity has been held . If you bought the sec urity a t d ifferent times, you c an spec ify whic h purc hase da te will be c ounted in the sa le to further minimize your c ap ita l ga ins tax.

You may a lso want to c onsider ?loss ha rvesting? in whic h investments tha t a re c urrently a t a tax loss a re sold to offset the rec ognition of c ap ita l ga ins. For many investors, tax loss ha rvesting throughout the year not only reduc es taxes, but has been p roven to add to investment returns over time. Onc e a sec urity is sold for tax purposes, the same sec urity c an?t be repurc hased for 30 days.

Losses a re app lied aga inst short-term or long-term ga ins depend ing on the timing of the loss.Exc esses then c an be app lied to either and c an even offset inc ome up to a reported loss of $3,000 per year. Grea ter losses c an be c a rried forward to offset investment ga ins in future years.

Gifts made to c harities reduc e

your taxab le esta te, while p rovid ing

tax b reaks too.

4 5 THINGS TO CONSIDER BEFORE BUYING YOUR FIRST HOME

5. Plan Ahead and Bunc h Itemized Expenses

Under the TCJA, misc ellaneous itemized deduc tions will c hange for 2018. Due to the overa ll higher standard deduc tions, many persona l exemptions and job expenses a re being elimina ted . This means fewer taxpayers a re likely to itemize and fewer still w ill be ab le to take a misc ellaneous deduc tion. Misc ellaneous itemized deduc tions inc lude expenses tha t many of us inc ur annua lly. However, to ga in a tax deduc tion, they must exc eed 2% of ad justed g ross inc ome. One way to still benefit may be to p lan ahead and bunc h expenses ac ross two d ifferent years into a sing le one to ga in a deduc tion. If you have a job searc h, a purc hase or sa le of a house, or another la rge unreimbursed expense in whic h you may be ab le to manage the timing, you may be ab le to push some of the rela ted expenses into a year in whic h you will q ua lify for a misc ellaneous itemized deduc tion. Unfortuna tely, sta rting in 2018 two of the most c ommon expenses a re no longer deduc tib le- fees you pa id to your tax p reparer and investment advisor.

Med ic a l expense deduc tions a re a spec ia l c a tegory of itemized deduc tions. If you have had a year with unforeseen emergenc ies with la rge med ic a l or denta l expenses, you might q ua lify for a deduc tion. Your unreimbursed med ic a l expenses must exc eed 7.5% of your g ross ad justed inc ome to q ua lify. However, keep trac k of a ll expenses you inc ur, as even travel and parking for your med ic a l c a re c an be inc luded .

For a list of misc ellaneous itemized deduc tions tha t a re impac ted by TCJA, c lic k here.

A Note About the Alternative Maximum Tax

The a lterna tive minimum tax (AMT) is an inc ome tax imposed by the federa l government a t a nearly fla t

ra te on an ad justab le amount of taxab le inc ome above a c erta in threshold . While tha t threshold has inc reased this year, you may still find you a re sub jec t to AMT, pa rtic ula rly if you live in a sta te with a high sta te inc ome tax. There a re a few stra teg ies to reduc e your taxes if you find yourself in AMT, but they genera lly take q uite a b it of advanc e p lanning. Be sure to c onsult your tax p rofessiona l in la te summer to determine if you will be sub jec t to AMT, g iving yourself enough time to p lan ahead .

There's Still TimeThere a re still things you c an do before April 17th to lower your tax b ill and there a re many things you c an do to p lan to minimize next year?s taxes. Onc e you have filed , we know you will sta rt thinking about wha t you?ll do if you a re rec eiving a refund ; perhaps you need to pay off lingering b ills. If not, before you think of the next indulgenc e, we rec ommend you put tha t refund right into your q ua lified retirement ac c ount. You?ll be setting yourself up for a more c omfortab le future and a lready get your first tax b reak for 2018.

Please remember tha t past performanc e may not be ind ic a tive of future results. Different types of investments involve va rying deg rees of risk, and there c an be no assuranc e tha t the future performanc e of any spec ific investment, investment stra tegy, or p roduc t (inc lud ing the investments and / or investment stra teg ies rec ommended or undertaken by Summit), or any non-investment rela ted c ontent, made referenc e to d irec tly or ind irec tly in this newsletter will be p rofitab le, eq ua l any c orrespond ing ind ic a ted historic a l performanc e level(s), be suitab le for your portfo lio or ind ividua l situa tion, or p rove suc c essful. Due to va rious fac tors, inc lud ing c hang ing market c ond itions and / or app lic ab le laws, the c ontent may no longer be reflec tive of c urrent op inions or positions. Moreover, you should not assume tha t any d isc ussion or information c onta ined in this newsletter serves as the rec eipt of, or as a substitute for, persona lized investment advic e from Summit. To the extent tha t a reader has any q uestions regard ing the app lic ab ility of any spec ific issue d isc ussed above to his/ her ind ividua l situa tion, he/ she is enc ouraged to c onsult with the p rofessiona l advisor of his/ her c hoosing. Summit is neither a law firm nor a c ertified pub lic ac c ounting firm and no portion of the newsletter c ontent should be c onstrued as lega l or ac c ounting advic e. A c opy of the Summit?s c urrent written d isc losure sta tement d isc ussing our advisory servic es and fees is ava ilab le upon req uest. If you a re a Summit c lient, p lease remember to c ontac t Summit, in writing , if there a re any c hanges in your persona l/ financ ia l situa tion or investment ob jec tives for the purpose of reviewing/ eva lua ting / revising our p revious rec ommenda tions and / or servic es.

18 BANK STREET - SUITE 202 - SUMMIT, NJ 07901 - 908.517.5880

advisors@summitplac efinanc ia l.c om

FOLLOW US:

Tax Planning Goals? smart tax planning can lower your taxes:

- Maximize deduc tions from retirement savings. - Contribute to flexib le savings ac c ounts for more savings. - Take advantage of available tax c redits. - Give generously to c harities to reduc e taxes and do

good. - Harvest investment losses.- Get a tax c hec k-up eac h August, leaving time to p lan. - Avoid penalties for underpayment of estimated taxes. - Give annual g ifts to family to reduc e future estate taxes.