Year-End Tax Planning

As the end of 2016 approaches, there are a few tax planning items I want to touch base with you on, particularly matters that have an upcoming deadline.

Required Minimum Distributions from Retirement Accounts

For clients over age 70 1/2 and a few other unique situations, a required minimum distribution (RMD) must be taken from certain types of retirement accounts by December 31st each year. There is a stiff 50% tax penalty if a distribution is missed, so this is not a planning item to overlook!

For all clients with these accounts managed by Precedent Asset Management, we take care of these required distributions for you. If you have IRAs held elsewhere, be sure to touch base with my office on how the RMD rules might apply to your accounts. And don’t forget to check-in with your parents on this as well if they have retirement accounts.

There are some exceptions, so feel free to contact me if you have questions or need help.

Charitable Donations with Appreciated Investments

If you are making year-end gifts to charity, using appreciated investments instead of cash will provide you with a charitable tax deduction and avoid capital gains tax. These gifts take longer to process than cash, so the gifting paperwork should be submitted by December 14th.

Stacy will process these gifts for you, and you can simply send her the charity’s gift instructions and the dollar amount you want to gift (send to We will review the gift to see if it makes sense to use capital gains in your situation, and then facilitate any resulting gifts from your accounts here.

IRA and Roth IRA Contributions

IRA, Roth IRA, and employer retirement plan contribution limits are unchanged for 2016 but vary based on income levels and age. The start of the year is the time to review these and ensure you are receiving the maximum available tax advantages, then adjust your monthly contributions accordingly and catch up on any missed 2016 contributions before filing your taxes.

I recommend you contact me in January to review these contributions and make any needed adjustments. Just send me a quick note and I will let you know if there is any additional information I need from you in order to complete the review.

529 Education Savings Plan Contributions

2016 contributions to a 529 Plan must be received by the custodian before December 31st. In some states, including Indiana, missing this deadline will mean the loss of significant tax benefits and credits.

Pushing Deductions into the Current Tax Year

If you are near the tax thresholds for double taxation of Social Security benefits, itemized deductions or marginal tax brackets, or have variable income, you can achieve significant tax savings by lumping deductions into alternating high and low years. Common items that can be pushed into the current year include charitable gifts, property taxes, state taxes, medical expenses, long-term care premiums, business expenses and more.

Realizing additional income through Roth conversions and offsetting the income with pushed deductions can further enhance lifetime tax savings.

Each of these tax transactions needs to be completed by year-end. If you haven’t explored this tax planning already, contact my office after your 2016 tax return is complete and we can discuss these strategies based on your unique situation.

I will in touch again after the New Year with some additional tax information as we prepare for the 2016 tax filing season.

I hope you are having a joy-filled holiday season!