Pumpkins, Football, Turkeys and…Taxes!

What do these things have in common? They relate to this time of year. Yes, even taxes.

With just over two months left in 2016, now is a good time to review your tax situation with your accountant and advisor.

With your accountant or advisor’s help, assess whether or not you can use any of the following tax-saving tips:


If you expect to be in a lower tax bracket in 2017, consider deferring a bonus or capital gains on investments. If you’re self-employed or do consulting work, delay billings until late December to move income received into next year. The opposite is true as well, of course. If you think you’ll be in a higher tax bracket next year, you may want to accelerate income into 2016.


If you itemize deductions, consider paying deductible expenses such as medical expenses and state and municipal taxes before the end of the year. Charitable contributions offer another deduction opportunity. Moreover, those over 70 ½ can make a qualified charitable distribution of up to $100,000 directly from an IRA without increasing taxable income. The added benefit is that the charitable contribution counts toward the account owner’s required minimum distribution.


Deductible contributions to a traditional IRA, pretax contributions to an employer-sponsored retirement plan such as a 401(k), and, for self-employed persons a SEP IRA or Individual 401(k), can reduce your taxable income. If you haven’t already contributed the maximum consider doing so before year end. At the very least, contribute the amount that will be matched by employer contributions. You have until April 17, 2017 to make IRA contributions and your tax filing date to make SEP IRA contributions for 2016, but the sooner you fund the account, the sooner it has the potential for tax-deferred growth.


Sell investments such as stocks and mutual funds that have losses to offset any taxable gains you have realized during the year. If your losses are more than your gains, you can use up to $3,000 of excess loss to offset other income. Losses exceeding $3,000 can be carried over to the next year. In fact, you can carry over losses year after year for as long as you live.


If you will be in a lower tax bracket in 2016, than in subsequent years, consider increasing 2016 taxable income by converting all or part of your traditional IRA to a Roth IRA (every dollar converted is taxed at your prevailing income tax rate). Since Roth IRAs do not have required distributions, the strategy here is to lower your required distributions in later years when your tax rates may be higher.


You must start taking regular minimum distributions from your traditional IRA and employer-sponsored retirement plans (exceptions may apply here) by the April 1 of the year following the year in which you reach age 70 ½. Thereafter, annual withdrawals must be made by December 31 to avoid a penalty. This item made the list of tax planning tips because failure to comply triggers a severe 50 percent penalty!


Estimate the effect of any year-end planning moves on AMT for 2016. Many tax breaks allowed in calculating regular income taxes are disallowed for AMT purposes.

Taking the time to review your tax situation now could save you tax dollars in 2016 and beyond.

Barbara M. Ollinger, CFP®

Barbara joined HTG in 1998. As a senior advisor, she counsels clients on their financial planning concerns and designs and implements investment portfolios to meet her clients’ objectives.

Barbara has been a CERTIFIED FINANCIAL PLANNER™ practitioner since 2007. She received her BS in Business Administration from the University of Maine and her MBA from the University of Connecticut.
The information provided is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status or investment horizon. You should consult your attorney or tax advisor.
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