Tax Tips for Year End 2017
The final days of the year can be an important period for implementing tax savings strategies. Below are some tips that you may find helpful.
Defer income or distributions. If you have need for a one time distribution as year-end approaches, evaluating which type of account you take that distribution from, the tax implications and whether you should wait until January, a new tax year, is smart.
IRAS or Retirement Plan Contributions.Taking advantage of your company's match is just good common sense as well as considering whether you should utilize the Roth 401k. You'll pay taxes on these contributions today but you'll pay no taxes on future distributions. If you have no access to a company retirement plan then IRAs are an option.
Required Minimum Distributions (RMD).Although you are allowed to defer taking your first RMD until the year after you turn 70½, this often results in having to take two RMDs in the same tax year. To avoid this, consider taking your first withdrawal by December 31 of the year you actually turn 70½. Failure to take your RMD on time can result in a 50% penalty for the amount not distributed.
Harvesting Losses offset gains and reduce taxes owed.Tax loss harvesting is the practice of selling a security that has experienced a loss to offset current and future gains and income which can result in lower taxes.
Gifting in Appreciated Assets.Make a bigger impact by donating long-term appreciated securities, including stock, bonds, and mutual funds, directly to charity instead of selling them and then donating. This can automatically increase your gift and your tax deduction.
Qualified Charitable Distribution (QCD) from an IRA.You can make a donation directly to charity of your required minimum donation via a QCD (maximum of $100,000). Often this results in a bigger gift as the individual pays no taxes on the RMD distribution and resulting donation. However, per IRS Section 408(d)(8), there are very stringent rules imposed on qualifying QCDs so please consult with your tax professional first.
Sources: Michael Kitces CFP®, Broadridge and IRS