Tax Strategies to consider before year end
1.Harvest losses to offset capital gains
If you have realized capital gains from selling securities and do not have any previous losses to carry forward, you may want to consider selling some positions at a loss to offset some or all of those gains. If you intend to purchase the same position back, you will need to wait at least 31 days before buying it again to avoid a wash sale.
2.Establish a Qualified Retirement Plan
Self-employed individuals should consider opening a retirement plan. Maximum contribution amounts are larger compared with a regular IRA. As such, depending on the plan type could offer other tax benefits.
3.Make deferred compensation elections
If you already have a plan established, evaluate “maxing out” your contribution limit.
4.Donate to charity
Consider donating appreciated securities. Your deduction will be the fair-market value of the securities on the date of the gift, not your original purchase price. “Contributions to charitable organizations may be deducted up to 50% of adjusted gross income.” “Contributions to certain private foundations, veteran’s organizations are limited to 30% of adjusted gross income.” Another option is to set up a Donor Advised Fund.
You can gift up to $14,000 ($28,000 married couples) per donee with no federal gift tax or reporting requirements. There are no tax ramifications for the recipient.
6.Flex Spending Account
Check your balance to see if there are any funds remaining. Typically Flex Spending Accounts are “use it or lose it” for the calendar year. Some employers may offer a grace period for the first two and a half months of the following year.
7.Take your Required Minimum Distribution (RMD)
If you are 70.5 or older, you must take your RMD from a traditional IRA and/or IRA based plan. Failure to do so results in an IRS penalty of 50%. If you do not need the money, you can donate up to $100,000 directly to a charity from your account.
8.College 529 Plans
Instead of gifting $14,000 to an individual directly, you can contribute to a 529 plan for future college expenses.
Please consult with your Financial Advisor and/or tax accountant to determine what situation(s) is best for you.
The material is for informational purposes only. It should not be construed as advice meeting the particular investment needs of any investor. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Before investing in any 529 plan, you should consider whether your or the designated beneficiary's home state offers a 529 plan that provides its taxpayers with state tax and other benefits that are only available through the home state's 529 plan. You also should consult your financial, tax, or other advisor to learn more about how state-based benefits (or any limitations) would apply to your specific circumstances. You also may wish to contact directly your home state's 529 plan(s), or any other 529 plan, to learn more about those plans' features, benefits and limitations. Keep in mind that state-based benefits should be one of many appropriately weighted factors to be considered when making an investment decision.
Investment objectives, risks, charges, expenses, and other important information are included in a 529 plan's offering statement; read and consider it carefully before investing. There is no guarantee that the 529 plan will grow to cover college expenses. You may also go to www.collegesavings.org for more information.