Start Your Tax Planning Before Year End

Start Your Tax Planning Before Year End

If you are like most Americans, you are just starting to put together all your documentation to take to your accountant, so that you can file your tax return for 2015. But according to experts, you should have started planning for the preparation of your return around the end of the summer, or at least before the holiday season. Here are some things to remember when you start that early tax planning in 2016.

Pay Attention to Gains and Losses

If 2016 ends up anything like 2015, with mostly flat or slightly improved portfolio positions, you may want to offset some gains from prior years by selling some investments at a tax loss. You can take a loss of as much as $3,000 per year, but don’t wait until Christmas to try to get it done.

Be Intentional with Your Giving

You can make annual gifts of up to $14,000, to as many people as you wish, without any effect on your $5,000,000 lifetime exemption. You can have a specific investment account designated for charitable purposes, with the bonus of being able to take a tax deduction in the year you contribute to the investment fund, without having to distribute the funds yet. Investment advisers say that many such accounts are “zeroed out” at the end of each year, but others have accumulated millions of dollars in tax write-offs.

Don’t Forget Contributions and Distributions

You have until April to make donations to an IRA that will be deductible on your 2015 return, but most other deductions must be based on calendar year contributions. In addition, if you are over the age of 70 and 1/2, you must take a distribution from your IRA by year-end, or face a penalty. Financial advisors typically recommend that you take the distribution as early in the year as you can, so that it’s done.