Why Some Tax Strategies Should Wait Until Next Year

December 16, 2017

calendar, new york times, tax strategies

The Senate and the House closed in on a final version of the tax bill on Friday, as Republican leaders stay on track for final votes on the consensus bill next week.

Some tempting planning opportunities might come to fruition next year, but tax advisers suggest that people resist until the bill becomes law. Why wait? Because taxpayers will be no worse off than they are today, and could be better off if a new tax code is enacted.

[Paul Sullivan] looked at the strategies that could be important next year if the tax overhaul shakes out the way advisers believe it will.

Hold off on gift giving.

The estate tax has not been a concern for more than 99 percent of Americans since President Barack Obama and Congress increased the exemption in 2012 to $5 million per person and indexed it to inflation. And under the joint plan discussed this week, that exemption would rise to more than $11 million.

Yet that does not mean there are not planning opportunities for the very wealthy. For one, those who are thinking of making a taxable gift above the current exemption amount should generally wait.

If the first-in, first-out rule for selling blocks of stock, which [Paul Sullivan] wrote about last week, takes effect, one option that increases in attractiveness is giving appreciated stock to young adults.

If the owner were to sell the stock, the downside would be a capital-gains tax on the appreciated value, likely at the highest rate. But if the stock were given to a child over 21 who was in a low tax bracket, the child could sell the stock and pay little or no tax on the years of gains, said Liz Miller, president of Summit Place Financial Advisors, which focuses on multigenerational families.

This interview with Liz Miller originally appeared in The New York Times. Click here to read the full article.