Making a List; Checking it Twice…

Ira  While considering your long-term investment goals, meet with your team of professional advisors to look at any issues or changes that could impact your typical year-end planning.

Keep track of your RMDs. Understand the rules on required minimum distributions (RMDs). If applicable and if you have yet to do so, take your 2016 RMD to avoid a 50% penalty on required amounts not taken.

Here are a few other considerations:

  • Automate your RMDs so you never miss this important deadline.
  • You can take your first RMD during the year you reach 70½ or you can delay it until April 1st of the following year. If you delay and take two distributions in the first year after 70½, your income could go up and this may put you in a higher tax-bracket.
  • Qualified charitable distributions permit traditional IRA owners who transfer RMDs to qualified charities to exclude the amount donated from their adjusted gross incomes—up to $100,000.

Tax harvesting. Look at whether you could benefit from tax-loss harvesting. In other words, selling a losing investment to offset gains or establish a deduction of up to $3,000. Excess losses also can be carried forward to future years. Here are some thoughts when trying to decrease your tax bill:

  • Short-term gains are taxed at a higher marginal rate, so try to reduce those first;
  • Don't upset your long-term investment strategy when harvesting losses; and
  • Understand the "wash sale" rules that impact new purchases before and after the sale of a security.

Wash Sale. If you sell a security at a loss, then buy another "substantially identical" security within 30 days before or after the sale date, the IRS typically considers this to be a "wash sale" and will disallow the loss deduction.

Income and deductions. If you’re at or near the next tax bracket, pay close attention to anything that might bump you up and plan to reduce some taxable income before the end of the year. Consider these ideas:

  • Make a donation to a charity. This can benefit a good cause and reduce your taxable income. You also can gift up to $14,000 tax free to as many people as you want.
  • See if it makes sense to accelerate deductions or defer income, which may let you to minimize your current tax liability.
  • Some retirement plans also can help you defer taxes, like contributing to a traditional 401(k) lets you to pay income tax only when you withdraw money from the plan in the future (when your income and tax rate may be lower or you may have more deductions available to offset the income).
  • Analyze your income sources, such as earned income, corporate bonds, municipal bonds, qualified dividends and others, to reduce the overall tax impact.

Life Changes. New children and grandkids or moving to a new state are just some of the life changes that may affect your circumstances in the past year. These could have an effect on your year-end planning.

Reference: The (Hot Springs AR) Sentinel-Record (October 8, 2016) “Check this list — twice — before year-end”


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Update to our Process

The unprecedented coronavirus pandemic has taken our entire country by surprise. We understand how difficult this time is for America’s businesses and families.  However, we believe it is vitally important that we make every effort possible to continue to offer solutions that avoid disrupting our important partnership with you, your family and friends.  As you know, estate planning is not something that should wait for a more convenient time, therefore the opportunity to address your important goals both during and after this crisis should not wait.  To that end, we have added the option of a ‘virtual consultation’ to our office process.  You will now have a choice of either meeting with us in our office or in the comfort of your own home.