Five Bright Ideas About Year-End Tax Planning
2. Net investment income (NII) tax: The so-called NII tax has been a thorn in the side of high-income taxpayers. The provision requires you to pay a 3.8% of the lesser of your NII—which includes most investment income such as capital gains from securities sales—or the amount by which your modified adjusted gross income (MAGI) exceeds $200,000 for single filers or $250,000 for joint filers.
If you have potential NII liability in 2017, you could try to reduce your exposure before the end of the year. For example, you might move money into tax-free municipal bonds, or do what you can to keep your MAGI under the threshold. Note that distributions from traditional IRAs and employer-sponsored retirement plans don't count as NII but do increase your MAGI for the year.
3. Capital gains and losses: Traditionally, the end of the year is when investors look to "harvest" capital gains or losses (or both) from securities transactions, depending on your situation. This year is no exception, even with the specter of tax reform.
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