Momentous tax reform passed at the end of 2017 effective for this year. More than ever
before, purposeful and timely year-end planning may pay significantly—and in some
instances, almost miraculous—dividends. What follows are seven simple tax or financial
planning steps or ideas that you may want to consider. Acting now may save you
thousands!

1. Maximize Retirement Plan Contributions

Maximize 401(k) retirement plan contributions by the end of the year. Any dollar amount
you contribute to your 401(k) or similar employer-based retirement plan (if it’s not a Roth)
is excluded from your income, thus lowering your tax bill. If you have a plan where your
employer will match a prescribed amount of your contributions to the plan, take
advantage of it.

Contributions to a traditional individual retirement account (IRA) are tax deductible, within
certain limits, and are later taxable when you make withdrawals. If you have a Roth IRA,
you can invest after-tax dollars in the account, and future withdrawals are tax free
(provided certain rules are met). You have until April 15, 2019, to establish and fund a
traditional or Roth IRA for 2018.

2. Save Money with a Flexible Spending Account

If you have a Flexible Spending Account (FSA), make sure you use the FSA funds for
eligible expenditures by December 31. Use the money to buy new glasses or contacts, visit
your dentist, or buy other items that qualify under your FSA plan. Any amount that
remains in your flex account after year-end is permanently lost. (Note that some plans
have a grace period for payments made after year-end).

3. Bunch Itemized Deductions

The standard deduction for taxpayers increased dramatically in 2017: $24,000 for married
filers, $12,000 for singles, and $18,000 for household heads. Also, many popular
deductions were either pared back or eliminated altogether. If you estimate that you will
be at or near the standard deduction amount in both 2018 and 2019, you may want to
accelerate or defer deductible expenses to qualify for itemized deductions. This maximizes
the overall benefit of such deductions. For example, you could accelerate your mortgage
payment into this year by making a payment before year-end, thus increasing deductible
interest. Or you could bunch charitable contributions you were planning to pay over the
two years into one year.

4. Make Charitable Contributions Tax Efficiently

If you itemize deductions, consider giving appreciated stocks or mutual fund shares you
have owned for more than one year to a qualified charity. Your charitable contribution
deduction is based on the fair market value of the securities on the date of the gift, not the
amount you paid for the asset. You never have to pay tax on the profit.
Consider setting up a Donor Advised Fund (DAF). This is an effective way to bunch
charitable contributions that you ultimately want to make to qualified charities. While
investments are held in the DAF, any investment gains are tax free.

5. Evaluate Your Insurance

Year-end is a good time to take inventory of your overall financial fitness. If you own
permanent insurance, when was the last time you had it reviewed for performance? Have
your objectives changed since the insurance was placed? How have changes in tax laws
impacted the amount of death benefit you need?

Due to favorable tax laws related to life insurance, a policy grows with taxes deferred. In
addition, cash value in the policy may be accessed tax free through withdrawals and loans,
and death benefits are tax free. Is your insurance designed to take advantage of these
unique tax benefits?

Especially for those who are elderly or who have had a change in health—never cancel a
policy or allow a policy to lapse without first consulting a professional. Click here if you
would like to receive additional information or would like a complimentary review of your
insurance.

6. Review Your Investment Portfolio

Is your investment portfolio aligned with your risk tolerance? Are your asset allocations
appropriate for your income and retirement horizon? Many people have simply allowed
their investments to run on autopilot or allowed their cash to languish in low-interest bearing
accounts. Notwithstanding the recent volatility in the stock market, the market has
experienced an almost unprecedented bull run since March 2009. To the uninitiated, this
forebodes risk. To the financially prudent, this means potential opportunity.

Have you generated capital gains during the year? Consider doing some tax loss
harvesting before year-end. Consult an advisor to ascertain that your investments are
optimally allocated to achieve your objectives.

7. Make Needed Small Business Asset Purchases

For qualifying property placed in service in 2018, the new tax act increased the maximum
Section 179 deduction to $1 million (up from $500,000 in 2017). First-year 100% bonus
depreciation was expanded to include not only new but used property acquired and
placed in service in 2018. This allows a business to write off the cost of some or all of its
qualified 2018 asset additions on this year’s return. Consider purchasing or financing
needed acquisitions between now and year-end. Before making such purchases, contact
your advisor for requirements in taking advantage of these tax benefits.

The above list is by no means all-inclusive. It is, however, illustrative of steps that may be
taken to reduce your tax bite and put saved dollars in your pocket. Although the tax
reform itself is massive and complex, we can make it simple for you. Had Naaman
dismissed the recommended solution to cure his malady, he would have paid a heavy
price. Just as Naaman’s advisor did, we simply ask that you act!

Braxton B. Barnes is a financial advisor and relationship manager at CAPTRUST