Planning Essentials:

7 Tips for Tax Season

You have to pay your 2016 taxes by April 18, 2017. Before you do, we are pleased to offer below seven key tax-savvy strategies to help you with all of your planning goals. As always, your J.P. Morgan team is here to discuss these and other planning ideas with you.

Stay abreast of the tax law proposals in Washington, and what they might mean for you. In Your Interest: The Tax Change Agenda.

Access Liquidity for Financial Flexibility

It is important to remain invested at all times, in a manner consistent with your strategic investment objectives. Having a line of credit in place could provide the liquidity needed to cover your tax obligations while enabling you to keep your investment portfolio intact.

Don’t Overlook the Benefits of a Borrowing Strategy

Consider how your liabilities can work for you, particularly as you look to maximize tax deductibility. Investment interest expense is generally deductible when using loan proceeds to purchase taxable investments (e.g., equities and taxable bonds). Additionally, mortgage and home equity borrowings are eligible for interest expense deductions.

Gift Smarter

Moving assets off your balance sheet can help reduce your tax bill, particularly if you expect those assets to grow. Use your annual U.S. gift tax exclusion and this year’s inflation-adjusted lifetime exclusion. Or gift to charity to also receive a tax deduction. One of the highest deductions available is for gifts made to donor-advised funds.

Examine Fiduciary Elections

If you serve as fiduciary for an estate or for a trust that gives you discretionary powers, including income distributions to charity, you can elect to treat (for deduction purposes) any qualified charitable payments made in 2017 as having been made in 2016. Elections must be made by April 18 this year (or later with prescribed extension filings).

Invest Tax Efficiently

Tax-exempt bonds offer attractive after-tax yields and relative value on a risk-adjusted basis. Consider equity strategies designed to offset realized capital gains and lower future tax bills.

Preserve Wealth

Notwithstanding any changes to the gift and estate tax regime, trusts will continue to offer benefits for families looking for an organized transfer of assets to family members or charities. Trusts can continue to provide federal and state income tax benefits, in addition to protecting beneficiaries' assets from creditors.

Protect Your Identity

Cybersecurity should always be top-of-mind but especially during tax season, as cyber criminals take advantage of the increased transmission of confidential financial information. Be aware, and understand the ways you can protect yourself. Read more on how to stay cybersecure.

Ask Yourself

Did I miss my contribution deadline?

Individuals have until the due date of their tax return (April 18 this year) to make contributions to their IRAs, Roth IRAs and, generally, SEP IRAs.

Does timing matter?

If you expect to receive a refund, filing earlier generally means that your refund will be paid earlier. However, if you expect to owe taxes, you should file as close to April 18 as you are comfortable.

Can I get an extension?

Taxpayers can apply for an extension if needed. However, you must pay your tax bill by April 18. If there is a shortfall, interest will be due on the difference to the final amount owed.

Why is April 15 not April 15 this year?

April 15 falls on a Saturday this year, and there are holidays in Massachusetts and Washington D.C. on Monday, April 17. Therefore, taxes are not due until April 18, 2017.

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