Start Your Year-end Tax Review Now – Save Yourself Some Stress
An important part of our service to you is to help identify actions you can take before year-end to minimize your personal 2016 federal income tax bill. Accelerating or delaying income and deductions, contributing to retirement plans, and taking investment losses are just a few of the strategies you might want to consider. Here is a checklist to help you get started.
- Max out your 401(k) before year-end.
For 2016, you can set aside $18,000 if you’re under age 50. If you’re 50 or older, you can contribute $24,000.
- Get your investment planning in order.
Year-end sell decisions, either to rebalance your portfolio at the lowest tax cost or to offset gains and losses, are only one aspect of investment planning. Another is keeping good records for the reinvested dividends of stocks you sell in 2016. Reinvested dividends add to your cost basis and reduce taxable gain or increase the deductible loss on the sale. Finally, consider the wash sale rule. This rule disallows a current-year loss when you purchase substantially identical securities within a 61-day period. If you plan to sell stocks to secure a loss, and intend to buy the stock back, don’t wait until the last moment.
- Make gifts before year-end.
The use-it-or-lose-it tax-free gifting allowance is $14,000 per donee for 2016. Remember, gifts to individuals are not tax-deductible.
- Contribute to your Health Savings Account.
Within limits, contributions are tax-deductible and can be used tax-free to pay unreimbursed medical expenses.
- Keep an eye on the “kiddie tax.”
This tax on your dependent child’s unearned income in excess of certain limits applies when your child is under age 19 (under age 24 if a full-time student). We have more planning strategies to save you tax dollars.
Contact us for a year-end tax review.
Insurance Enrollment Begins This Month
Beginning this month, you can sign up for a new 2017 health insurance policy on the health insurance Marketplace. You can also change or renew the policy you purchased during the last enrollment period.
Even if your current policy has an automatic renewal feature, you’ll want to verify that you’re getting the best deal, and that you are still eligible for the federal premium tax credit.
What if you didn’t sign up last winter and didn’t have health insurance coverage in 2016? You may owe a penalty on your 2016 federal income tax return. The penalty is calculated in one of two ways: as a percentage of your income, or on a per-person basis. You pay whichever is higher.
For 2016, the penalty is 2.5% of your annual household income, up to a maximum of the national average premium for a Bronze plan. The per-person penalty is $695 per adult and $347.50 per child under 18 (up to a maximum per-family penalty of $2,085).
Do you have questions about a year-end tax review or about the 2017 health insurance enrollment and tax implications? Please contact us today. We would be honored to help.