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5 simple tax moves to make before the end of the year

Even though we are coming up to the last quarter of the year, there is still plenty of time to make a few simple tax friendly moves that could be financially rewarding for you.  Following are 5 simple moves to consider.
What is a basic tax friendly move that many people miss?
One of the most common is not fully funding their Health Savings account. These contributions are usually pretax and a majority of people don’t contribute the maximum each year.  This is a great tool to pay for medical expenses with pre-tax dollars and can be a significant tax benefit.
If you have younger children, is there a tax move you should consider?
The most important is funding your 529 college choice saving plan to at least $5,000 in contributions for the year to obtain the maximum tax benefit. This move can save you significantly on your income tax burden.
Are there a special tax considerations for those who are 50 or older?
Yes, if you are 50 or older this year, you are eligible for the catch-up contribution limits for retirement savings. Make sure you reach this limit in your 401k or IRA accounts to get the maximum tax benefit for your retirement as these will all pre-tax contributions and will likely lower your tax burden when you complete your taxes.
Do we have longer to make these contributions?
For IRAs you could have up to April 15th to make the contribution but for 401k plans, they are typically based on a calendar year so you need to increase those contributions now.
What is the best way to help others and also help yourself?
Donating to a charity can be very advantageous to reducing your tax burden in many tax situations. Check with your tax expert and then decide how much you can give to help charities in need of additional funds as the holidays approach.  For many people, these donations can become tax deductions.
What is the concept of tax harvesting?
Always discuss this situation with your advisor team but the concept is to sell poor performing investments at the same time as selling high performing investments. The key is selecting the correct investments for this strategy.
How does that help your tax situation?
The goal is to cancel out your capital gains against your capital losses.  This move is likely to minimize your tax burden on your investment returns.  Or in other words, you won’t have to pay tax on the capital gains of your high performing stocks because your losses diminish or eliminate your gains.
Is there an urgency to complete these 5 moves now?
Yes, only because many of them require time to get completed and if you wait until December, you might miss your window of opportunity to use these simple moves.

Posted: 9/29/2016 with 0 comments

Categories: Donating, Financial, Money Matters, Taxes

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