taxplan18-600-1

Year-End Tax Planning 2018: Part 1

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Since we are getting towards the end of the year, I like posting ideas for year end tax planning. Accordingly, there will be a series of posts on this topic.

Year-End Tax Planning 2018: Part 1

You may have heard ex President Bush say, many years ago, “Read my lips. No new taxes.” Now read my lips (figuratively): “More new taxes… unless you know what you are doing.”

Higher-income earners must be wary of the 3.8% surtax on certain investment income if your Adjusted Gross Income (AGI) with some modifications exceed $250,000 for joint filers and $200,000 for single filers. Minimizing the impact of this extra tax becomes important if you earn above these income levels. This tax is on all taxable investment income including dividends, interest and capital gains but NOT tax free earnings. Thus, switching to municipal bonds becomes a better deal if you are subject to this tax. Deferring income to a future year might also be a way to lower your income threshold below these numbers so that you are not subject to the 3.8% surtax.

If this isn’t bad enough, there is an additional .9% Medicare surcharge for higher wage earners with the same threshold as above whether you are a high earning employee or are self employed. Self employed taxpayers have to worry about this in taking into account any estimated tax payments.


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