Personal tax planning strategies

Organizing important tax paperwork can help make the annual tax filing process run smoothly. But, taxes are about more than meeting a deadline. Year-round tax planning can help investors to manage their short-term tax liability, and stay on track to meet longer-term financial goals.

Tax Highlights

Annual gift tax exclusion1 $14,000
AGI phase out For itemized deductions and personal exemptions: $261,500 ($313,800 for couples)
Net investment income tax 3.8% on net investment income (interest, capital gains, dividends, income from non-qualified annuities): taxpayers with over $200,000 MAGI ($250,000 for couples)
Additional Medicare payroll tax Additional .9% of salary for taxpayers earning above $200,000 ($250,000 for couples)
Highest marginal tax rates Ordinary income: 39.6%
Capital gains: 20%
20% rate applies to long-term capital gains and qualified dividends if taxable income exceeds $418,400 ($470,700 for couples)
AMT tax2 Top AMT rate: 28%
Typically applies to a higher taxable income base


Income Thresholds At-a-Glance


Five Tax Savvy Strategies for 2017

  1. Consider options that can help to generate tax-free income.
    Higher income taxpayers subject to the highest marginal tax rate and the High Income Medicare surtax of 3.8% may be seeking to lower their tax bill through sources that generate tax fee income. Investments such as municipal bonds provide attractive tax equivalent yield (the yield an investor would require from a taxable bond), which increases for those in higher tax brackets.

  2. Explore strategies to reduce taxable income.
    Certain planning strategies, like maximizing contributions to a retirement plan or FSA and maximizing eligible deductions, can help to prevent an investor from reaching income levels that would necessitate paying more in taxes.

  3. Rebalance portfolios using cash flow. 
    When portfolios are rebalanced using the proceeds from the sale of existing investments, taxable gains may be realized. Instead, consider using dividends and interest earned within the account as the source of funds to rebalance.

  4. Limit taxable events within a portfolio.
    Review taxable investments and consider options like tax-efficient mutual funds, that strive to limit taxable events.

  5. Respond to life changes.
    It is a wise practice for investors to review account beneficiaries and estate plans regularly, and tax filing season can serve as a good reminder. Certain life events come with big tax implications and may require updates to financial accounts. Conducting a review of estate plans after life events can help to keep financial strategies aligned with an investor’s individual family needs and create opportunity to re-examine portfolio against current tax provisions.

Don’t go it alone
Making adjustments to an overall financial plan or investment portfolio with the sole intent to minimize taxes may not be optimal given the necessary focus on longer-term financial goals. Taxpayers should consult with their financial professional and tax advisor to review individual circumstances before making any tax-related adjustments to their financial plan or portfolio.


1. These annual amounts are not counted toward the $5,490,000 lifetime gift tax exemption.
2. Modified Adjusted Gross Income (MAGI) is your Adjusted Gross Income (AGI) with certain adjustments.
3. You may be subject to AMT if your taxable income, combined with adjustments and tax–preferences items, exceeds the applicable AMT threshold.