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4th Quarter Financial Planning Bulletin

In our latest edition of Inflection Points, we focus on year end tax planning strategies and provide a reminder about Medicare Open Enrollment.

Tax Planning Strategies

With three months remaining in our first year under the new Tax Cuts and Jobs Act, here are seven tax planning strategies you should consider before the end of the year.

1.) Bunch Charitable Contributions

  • With an increase in standard deductions this year ($12,000 for single filers & $24,000 for joint filers) and SALT deductions capped at $10,000, many people may not choose to itemize on their tax returns.8
  • If you would like to still receive tax deductions for your charitable donations, you may need to start bunching your charitable contributions.3
  • The strategy is to make 2 or 3 years’ worth of charitable donations in one year to maximum the benefit and then return to standard filing in subsequent years. Appreciated assets are ideal for charitable donations because of the double tax benefit.
  • Consider opening a “Donor Advised Fund” for your accelerated charitable funding which allows you to distribute the funds to charities at your discretion over a longer time frame.

2.) Tax Loss Harvesting

  • Identify any losses that can be used to offset capital gains within your taxable accounts in order to reduce your taxable income for the calendar year. If you have losses in excess of your capital gains, you can deduct up to $3,000 against ordinary income.1,2
  • If done correctly, you can maintain your investment allocation while harvesting losses as long as you don’t violate the wash sale rule.
  • Wash Sale Rule: buying a “substantially identical” security within 30 days before or after the sale of a security at a loss.

3.) Required Minimum Distributions (RMD’s)

  • If you are over the age of 70.5 or have an inherited IRA then you will need to take your RMD before 12/31.
  • There are penalties if you do not take your RMD on time.
  • If you turned 70.5 during 2018, you have the option to defer your first RMD until April 1, 2019.4

4.) Qualified Charitable Distribution (QCD)

  • If you would like to avoid realizing the income from your RMD for tax planning purposes, you can make a gift up to $100,000 directly from your IRA to a charity.1,2
  • This can be a more attractive option if you are trying to avoid the impact of additional income and might otherwise file under the standard deduction.

5.) Maximize Retirement Plan Contributions

  • For 2018, the maximum contribution for Traditional and Roth IRAs is $5,500 ($6,500 if over the age of 50) and $18,500 for 401(k), 403(b), 457 ($24,500 if over the age of 50).4
  • You may be able to make a tax-deductible contribution to a traditional IRA. Please consult your accountant for eligibility.
  • You have until April 15, 2019 to make 2018 IRA contributions.

6.) Contribute to a 529 Plan Account

  • Contribute to your 529 plan account so you will receive a possible state income tax deduction.
  • The amount of the deduction depends on the state.
  • For example:

Kansas- you can deduct up to $3,000 per child ($6,000 if filing joint) 7

Missouri- you can deduct up to $8,000 per child ($16,000 if filing joint) 6

*New for 2018: The new tax law allows up to $10,000 of qualified expenses (annually & per child) to be applied towards private elementary and high school education. Qualified expenses are defined as expenses that qualify for a tax-free withdrawal from a 529 plan account.

7.) Use Gift Tax Exclusion

  • For 2018, you are allowed to gift up to $15,000 ($30,000 for a married couple) to each person without dipping into your lifetime exemption amount. 1,2
  • The lifetime exemption amounts increased this year from $5,490,000 to $11,180,000 ($10,980,000 to $22,360,000 for a married couple).9
  • You can also make payments directly to educational institutions and medical providers on behalf of others without incurring a taxable gift or impacting your lifetime gift exemption.

Medicare Open Enrollment

October 15th through December 7th is the Open Enrollment Period for Medicare. This period is for making adjustments to Medicare Parts C & D (Medicare Advantage and Prescription Drug Plan) which will go into effect starting January 1, 2019.5

For those who already have Medicare, you may do the following:

  • Sign up for a Medicare Advantage Plan.
  • Change from a Medicare Advantage Plan back to Original Medicare (Part A & B).
  • Change from one Medicare Advantage Plan to another Medicare Advantage Plan.
  • Sign up for a Medicare Prescription Drug Plan (Part D).
  • Switch from one Drug Plan to another Drug Plan.
  • Drop your Medicare Prescription Drug plan.

For those clients that are within a couple years of Medicare eligibility, please consult our team regarding your options and the important deadlines for enrollment.  We can help you sift through the “noise” and guide you to make the appropriate healthcare decisions for your family.  In addition, we have recently created a “Guide to Medicare” document as a helpful resource tool to use during the Medicare planning process.  Please contact a member of our team if you would like a copy.


  1. https://turbotax.intuit.com/tax-tips/tax-planning-and-checklists/top-8-year-end-tax-tips/L5szeuFnE
  2. CFP®, Let’s Make a Plan. http://www.letsmakeaplan.org/blog/view/lets-make-a-plan-blogs/prepare-for-2018-tax-changes-with-these-12-year-end-financial-moves
  3. https://www.kiplinger.com/article/taxes/T055-C000-S002-charitable-giving-under-the-new-tax-law.html
  4. https://www.irs.gov/retirement-plans/ira-year-end-reminders
  5. gov. https://www.medicare.gov/
  6. Missouri’s MOST. https://www.missourimost.org/home/why-choose-most/most-529-tax-benefits.html
  7. Learning Quest. https://www.learningquest.com/home/learn-about-529/benefits-features/tax-advantages.html
  8. https://www.irs.gov/newsroom/individuals
  9. https://www.cffpinfo.com/documents/annual-limits/2018_Annual_Limits.pdf

Important Disclosures:

The views expressed herein are those of John Nemmers on October 17, 2018 and are subject to change at any time based on market or other conditions, as are statements of financial market trends, which are based on current market conditions. This information is provided as a service to clients and friends of Kavar Capital Partners, LLC solely for their own use and information. The information provided is for general informational purposes only and should not be considered an individualized recommendation of any particular security, strategy or investment product, and should not be construed as, investment, legal or tax advice. Past performance does not ensure future results. Kavar Capital Partners, LLC makes no warranties with regard to the information or results obtained by its use and disclaims any liability arising out of your use of, or reliance on, the information. The information is subject to change and, although based on information that Kavar Capital Partners, LLC considers reliable, it is not guaranteed as to accuracy or completeness. This information may become outdated and we are not obligated to update any information or opinions contained herein. Articles may not necessarily reflect the investment position or the strategies of our firm.