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High Net Worth Year-End Tax Strategies

December 13, 2016

What’s in store for high net worth individuals with regard to Trump’s tax plan? Decreased tax rates and limited deductions, perhaps. Learn how you can strategically plan for these changes.

With tax reform at the top of the agendas of congressional lawmakers and President-elect Trump, we know that significant changes may be coming. There are some major tax reform proposals in the works that could have a large impact on high net worth individuals, in particular. It is important to consider some year-end tax strategies this year in order to prepare for potential major changes in 2017.

Here’re a couple of Trump’s proposed tax changes in 2017 and how they could impact high net worth individuals.

Cap Charitable Donation Amounts at $100,000 in 2017.

What can I do to keep taxes at a minimum? If president-elect Trump caps the charitable donation amount at $100K ($200K for married couples), ultra-high net worth individuals (UHNWI) will be missing out on this key tax saving strategy. In preparation for this change, individuals should consider accelerating and possibly increasing charitable donations this year. Individuals who can afford to do so could still reap the benefits this year should Trump’s proposed tax plans be approved next year.

For example: If an individual makes $4 million dollars per year and typically donates $1 million, it might be in his/her best interest to donate $2 million in 2016 in preparation for the new limits in 2017. Between the $100K charitable deduction limitation and possibility of lower top tax rates in 2017 (also part of Trump’s tax reform proposal), you’ll get a bigger bang for your buck by accelerating your contributions to this year.

Eliminate Net Investment Income Tax

What can I do to keep taxes at a minimum? Typically there is little-to-no benefit in pre-paying state tax in December for individuals habitually in AMT. However, this might be something to consider if president-elect Trump eliminates the Net Investment Income Tax (NIIT) as well (an additional 3.8% that could offset your tax bill this year as it relates to investment income, that wouldn’t be available next year), also one of Trump’s tax proposals.

Act Now

Many of Trump’s proposed tax plans focus on decreasing tax rates and limiting deductions. Accelerating charitable donations and other itemized deductions to this year could be an advantageous year-end tax planning strategy as it would allow tax-payers to offset income at high rates and open up more ability to take deductions.

Questions? Contact any member of our Private Client Services Team for more information.

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