SUSAN TOMPOR

With Trump, tax changes possible, so do these things now

Shopping for bargains isn't the only financial tip for December. Consider the implications of possible tax reform in 2017 when you pay property taxes or make charitable donations.

Susan Tompor
Detroit Free Press Personal Finance Columnist
  • Pay attention to the rules for your Flexible Savings Account. Use the money you need by Dec. 31.
  • Review how much money you've had withheld in a 401(k). See if you can add more before year end.
  • Clearing out a closet? Make the donation by Dec. 31 if you want to itemize deductions for 2016.

It's December, and no one needs to pile more stuff onto his or her to-do lists.

But when it comes to your money, it's wise to eke out a little time to take care of some business by Dec. 31.

Shopping isn't the only way to save cash in December. Look at some tax rules and ways to generate cash, too, like redeeming Series EE savings bonds issued in 1986.

Yep, it's a chore, just like the shopping, the baking, the untangling of lights. But these last-minute moves need to get done before the New Year.

1) Pay off any bills you can.

Most people aren't looking to spend more money in December. But Donald J. Trump won the presidential election and will be inaugurated Jan. 20.  And many experts say there are likely to be major changes in the tax rules for 2017, if Trump and a GOP-dominated Congress get their way.

On Wednesday, President-elect Trump's nominee for Treasury Department secretary, Steven Mnuchin, said Americans should expect the biggest overhaul in taxes since President Ronald Reagan.

As a result, Darren L. Neuschwander, a certified public accountant and managing member for Green, Neuschwander & Manning, a virtual CPA firm with CPAs across the country, said he would advise some homeowners to consider paying their winter tax bills in December, instead of dragging the payment into 2017.

Why? There's a chance that the deduction for state and local taxes, including real estate taxes, could be reduced or eliminated as part of overall tax reform.

If you're subject to the alternative minimum tax (AMT), however, your property tax deduction can be disallowed under AMT rules, so you wouldn't benefit from paying those real estate taxes earlier.

Neuschwander, a CPA based in Alabama, said some people, depending on their tax brackets, may want to consider making additional charitable contributions by Dec. 31 with the thought of possible changes in the tax rules, as well. The thinking is that Congress could pass legislation to drive tax rates lower in 2017, so a deduction could be worth more on a 2016 return.

Yet others caution that we really don't know what will happen in Congress in 2017.

Kathy Pickering, executive director for the Tax Institute for H&R Block, said it's possible that Congress will focus mainly on corporate tax reform first — and delay addressing big changes in tax rules for individuals.

"At this point, it's way too soon to know what moves they're going to make," Pickering said.

2) Consider: Do you need to sell, sell, sell? 

Some taxpayers might want to consider selling some stock or mutual funds at a loss in order to offset taxable investment gains.

Anne Nichols, chartered financial analyst and managing director for Fern Capital in Dearborn Heights, said some taxpayers may even want to consider maximizing investment losses in 2016, given that tax rates might come down in 2017.

You might be able to reduce taxes on investment gains for distributions from mutual funds by realizing losses on stocks, bonds or mutual funds held outside of an IRA or 401(k).

You don't want to sell off an investment just for tax reasons, though, if you think the investment is set to rise in value in the long term. And you have to realize, again, we don't know where tax reform is really heading in Washington.

Neuschwander also notes that investors want to pay attention to the "wash sale" rules if they plan to buy more shares soon. If you sell a security at a loss and buy the same or a "substantially identical" security within 30 calendar days before or after the sale, the loss is typically disallowed for current income tax purposes. So selling ABC stock on Dec. 28 and buying ABC stock on Jan. 5 means you're not getting the tax break for 2016. The loss could be deferred into future years. See IRS Publication 550.

3) Consider, also: Do you want to write a check or give clothing to a charity? 

Taxpayers who itemize deductions — and do not take the standard deduction — might be able to lower their 2016 tax bill if they donate to a charity by Dec. 31.

Be sure to get a receipt and keep the canceled check for all contributions.

If you're giving away cash or goods valued at $250 or more, you’ll need a written acknowledgment from the charity that includes a description of the item and other details.

"Keep good track of that," Pickering said.

4) Remember those U.S. savings bonds, especially the ones issued in 1986.  

Millions of Series EE savings bonds were bought from January 1986 through October 1986 when the bonds paid 7.5% for the first 10 years. But savings bonds only pay interest for 30 years after the issue date.

Bonds bought in 1986 have stopped earning interest now.

If you were born in the early 1980s, you might not even realize that someone bought you a savings bond as a birthday or Christmas present in 1986.

About 10.4 million Series EE savings bonds issued in 1986 had yet to be redeemed through Oct. 31, and those bonds in total are valued at $7.7 billion.

About 2 million Series EE savings bonds that were issued in 1986 — and valued at $2 billion — were redeemed through Oct. 31.

How to hunt for buried U.S. savings bonds

Of course, there are plenty of savings bonds that were issued before 1986 that remain uncashed and would no longer be earning more interest. As of Oct. 31, there were 57.6 million matured savings bonds outstanding, including the 1986 bonds, valued at $23.6 billion.

It's possible to go online to find some missing or lost savings bonds. Try the Treasury Hunt database. Go to www.treasurydirect.gov for the link. You can use this link to discover if savings bonds issued in 1974 and after are no longer earning any interest and have not yet been redeemed.

TreasuryDirect.gov has a new "How Do I...?" link on its site to offer some guidance on dealing with filing claims for lost bonds, cashing bonds and estate issues relating to savings bonds.

Susan Tompor: Baby boomers, like Cher, must study IRA rules

5) Retired baby boomers must see if they need to withdraw money from their IRAs and 401(k)s. 

To avoid costly penalties, retirees who are 70-and-a-half and older must take a required minimum distribution every year from traditional IRAs and 401(k)s before Dec. 31. An inherited IRA has this requirement, as well, said Sam Huszczo, owner of SGH Wealth Management in Southfield.

This rule does not apply to Roth IRA accounts.

In some cases, retirees have overlooked that Dec. 31 deadline and created painful tax headaches. Ignoring a required minimum-distribution deadline can trigger a 50% penalty on the amount that was required to be withdrawn.

Contact Susan Tompor: stompor@freepress.com, 313-222-8876 or on Twittter @Tompor