As we settle into the last quarter of the year, your mind may be on a different kind of list. But December 31 marks an important deadline for many year-end tax moves, including charitable contributions, so it makes sense to create a tax to-do list and execute each item before you ring in the new year. We've started one for you, but since we can't touch on all of the available tax-advantaged opportunities, it's a good idea to contact your tax advisor to learn exactly which strategies can benefit you the most.
If you're looking to sell securities to rebalance or take advantage of other opportunities, consider offsetting potential capital gains taxes by selling underperformers as well.
Timing Income and Deductions
Discuss accelerating or deferring income and deductions to reduce your tax liability.
Know Your Threshold
Folks at or near the next highest tax bracket should pay close attention to anything that might bump them up (such as capital gains without corresponding capital losses) and make plans to reduce taxable income before New Year's Eve or delay selling until 2016.
Your financial plan may be off-kilter due to concentrated positions or appreciation. Rebalancing can potentially bring your asset allocation back in line with your objectives.
If you're 70½ or older and have an IRA, take your required minimum distributions to avoid any penalties.
Give to loved ones (the gift tax exclusion limit is $14,000 for 2015) or to a charitable institution. Charitable donations keep you connected to your community, and the tax deductions are a nice little gift for you, too. Your financial advisor can help you determine if you have highly appreciated assets that could be incorporated into your charitable-giving strategy.
December 31 is the last day to establish a qualified retirement plan (in most cases). You've got until April 15 to fully fund it, but why give up months of potential growth? Don't forget catch-up provisions, if eligible.
Delete, shred or digitize old documents and ensure everything is where it should be so that you can review your progress over the past year and prep for tax season.
Make a Date
Coordinate with your accountant and estate attorney to help you make the most of tax laws and identify opportunities. Also, set aside time with relevant parties at least once a year or when you have a major life change to review your accounts, beneficiaries and estate planning documents to ensure they're tax-efficient and accurate.
Article provided by Melissa Stewart, CFP®, AIF®, Financial Advisor at the VanderWeele I Stewart Group of Raymond James & Associates.
The information contained herein has been obtained from sources considered reliable, but we do not guarantee that the foregoing material is accurate or complete. Raymond James is not affiliated with any other entity listed herein. Raymond James & Associates, Inc., member New York Stock Exchange/SIPC. Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, Certified Financial Planner™ and CFP® in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.
Asset allocation does not guarantee a profit nor protect against loss.
Chart courtesy of VanderWeele I Stewart Group of Raymond James & Associates.