Year-End Tax Planning

Year-End Tax Planning

​As we near the end of another year, it's a good time to see if there are any actions to implement in order to lower your tax bill next April.

  1. Portfolio review for capital losses
    • A review of your non-retirement accounts in order to liquidate any holdings that would produce capital losses. If your losses exceed your capital gains, you can deduct up to $3,000 against ordinary income. Any excess losses above the amount are carried forward to future years.
  2. Establishing a 401(k) plan
    • If you're self-employed you have a 12/31 dead-line to establish a 401(k) plan. Other types of retirement accounts (SEP-IRA's, traditional IRA's) can be set up after year end and still be timely funded in 2017 to produce a 2016 write-off.
  3. Roth Conversions
    • If your income is down in the current year (hopefully it is not), a Roth Conversion can make lemonade out of lemons. Converting an IRA to Roth IRA may be something to consider. You should talk this over with your tax preparer ahead of time however. Keep in mind that a Roth IRA Conversion must be completed by 12/31 for the current year.
  4. Required Minimum Distributions (RMD)
    • The IRS mandates that IRA account holders start withdrawing their traditional IRA's by age 70 1/2. There is a special extension the year that this commences until April 1st of the following year. The penalty for failure to withdraw the RMD is 50%.

This is a short list of several items that you may want to look into to assist you planning ahead for the coming tax filing. Give us a call if you have any questions or would like to explore some options.

Year-End Gifting
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Thursday, 21 January 2021

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