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2016 Year End Tax Tips

The end (of 2016) is near. Still, you can do a lot to help your finances before the ball drops on Saturday and we ring in the new year. Let’s look at some of my top year end tips –

  • The Charitable RMD is part of the tax code that allows those who are 70-1/2 and taking RMDs from their IRA to donate directly to a charity. In effect making a donation deductible even though the donor doesn’t itemize.
  • If you are retired already, and are not too close to the next tax bracket consider a Roth conversion to “top off” your current bracket. Say you are at a taxable $65K. You have an additional $9,900 you can withdraw or convert to Roth, and pay just 15%. By converting to Roth, you help to keep from breaking through the 25% rate as your withdrawals increase in the future.
  • Are you getting a big refund (I know, big is relative) every April? Has no one told you that Big Tax Refunds Are Really Bad? Let me be the first.
  • Do you have an FSA (flexible spending account) at work? If there’s a bit of money left, you should consider a quick purchase, typically, eyeglasses come to mind as they are an easy expense, and have a wide range of cost from simple reading glasses at $100 to a fancy pair of glasses well over $500. Don’t let that money get forfeited.
  • Year end is a good time to look at how much you are depositing to your 401(k) account. Can you bump the deduction up by a percent or two? You won’t regret it. Are you at least depositing enough to grab the matching amount? If not, do this now.
  • Did 2016 bring you any change in family members? Marriage, new child, divorce,  family member pass away? It’s time for an annual review of the beneficiaries on all of your accounts. It’s never to soon to see if your new spouse has a former spouse of their own as a beneficiary. Pretty important to get that updated asap.
  • See if the Tax Loss Harvesting can help you. You can read the full article, but the important thing to know now is that you can take stock losses against up to $3000 of ordinary income each year. Hopefully, you are making a profit, but this is an easy way to get a bit of money back on a stock you are holding at a loss and are wanting to sell.
  • Last, it’s not too late to beat the standard deduction. This strategy depends on your current situation, of course. It’s ideal for a couple who just misses the required minimum for itemizing, $12,600 for 2016. Pulling some of these deductions into the current year can allow them to itemize. Check out the article I wrote earlier this month, and see if this strategy can help you.

That’s all for this year, Happy 2017


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