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Year-End Tax Planning

Year-End Tax Planning

You can make contributions to 401(k) or 403(b) retirement plans until December 31, 2016, and SEP or Roth IRAs until April 15, 2017. Maximum contributions vary. With a 401(k) plan, you defer up to $17,500 versus Traditional and Roth IRA maximum contributions of $5,500 ($6,500 if you’re age 50 or older).

You have until December 31, 2016, to take an RMD (Required Minimum Distribution) from your retirement plan if you’re over the age of 70½ or you face a hefty 50% penalty. The most common mistake made is the failure to take an RMD for both an IRA and 401(k). You must take a RMD from each plan. Multiple IRA accounts are treated as a single account, so only one RMD is required.

Consider making a charitable contribution of highly appreciated stocks. If you’re over 70½, donate your required RMDs to your favorite charity up to a maximum of $100,000. This could lower your taxable income and may even help shelter your social security income from taxes.

If you realized losses on some stocks during the tax year, you can only deduct $3,000 of that loss. One strategy to consider, Tax Harvesting, is to sell some of the stocks you’ve made money on during the year to offset your stock losses. You could then wait 31 days and buy these same stocks back again. It’s important to wait 31 days, otherwise the transaction is considered a “wash sale” and you would forfeit the tax benefits.

If you have a Traditional IRA, you might want to convert all or part of your IRA to a Roth IRA, providing you don’t increase your taxable income for the year. Converting to a Roth IRA may save you and your loved ones future taxes.

Before you make any changes to any retirement plan, always consult a qualified tax professional. For assistance with all of your financial planning needs, I encourage you to discover just how Financial Partners of TN, LLC can assist you. Chosen by UT Federal Credit Union, Peoples Bank of the South, and UBANK to provide their members with independent financial planning services, Financial Partners can be your financial partner to a brighter financial future.

Financial Partners of TN, LLC
2100 White Avenue
Knoxville, TN 37916

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