Year End Tax

End-of-year tax planning

Share

April 2017 may seem like a long way off, but in tax terms it’s already here. In order to minimize your 2016 tax bill you need to start planning now. Here are some things you can do between now and the end of the year to help make your April 18 (Tax Day 2017) a little happier.

Give to charity

December is the season of giving, and by giving to a favorite cause you maximize your deductions for 2016. Be sure to think beyond cash: both your generosity and your tax benefits can be boosted by donating appreciated stock or property. Remember though, you’ll need a receipt to take a deduction for any charitable contribution.

Take your required minimum distribution

If you are over age 70½ and have a traditional IRA, be sure to take your required minimum distribution. Should you fail to do so, you’ll face a stiff penalty from the IRS: a 50% excise tax on the amount you should have withdrawn based on your age, life expectancy, and the amount in the account at the beginning of the year. Annual withdraws must be made by Dec. 31 to avoid the penalty.

Roth IRAs do not have required minimum distributions.

Watch out for the alternative minimum tax

The alternative minimum tax (AMT) is designed to set a limit on the tax benefits and loopholes that the wealthy can employ; its purpose to help ensure that everyone pays a minimum amount of taxes. However, it wasn’t – until 2013 – automatically adjusted for inflation so over time it came to affect more and more middle-class taxpayers. Be sure to discuss your risk of being subjected to the AMT with your tax advisor before the end of the year.

You can find helpful tax planning strategies for any time of year in our Tax Center.

This information is provided for informational and educational purposes only. Waddell & Reed believes the information has been obtained from sources considered to be reliable, but does not guarantee the accuracy of the information provided. This information is not meant to be a complete summary or statement of all available data necessary for making financial or investment decisions and does not constitute a recommendation.

Please note that the information provided may include references to concepts that have legal, accounting and tax implications. It is not to be construed as legal, accounting or tax advice, and is provided as general information to you to assist in understanding the issues discussed. Neither Waddell & Reed, Inc., nor its Financial Advisors give tax, legal, or accounting advice.

This information is not meant as financial or investment advice pertaining to your personal situation. The selection of appropriate investment, insurance or planning options and/or strategies should be made on an individual basis after consultation with appropriate legal, tax and financial advisors. Nothing contained herein is intended as a solicitation or an offer to buy or sell any product or service mentioned and they may not be suitable for all investors.

Securities offered through Waddell & Reed, Inc., Member FINRA/SIPC, are not insured by FDIC, NCUA or any other government agency, are not deposits or obligations of the financial institution, are not guaranteed by the financial institution, and are subject to risks, including the possible loss of principal. Insurance products are offered through insurance companies with which Waddell & Reed has sales arrangements. Guarantees provided by insurance products are subject to the claims-paying-ability of the issuing insurance company.

Need more insight? Let us be your guide.

Our national network of experienced financial advisors can help you create a personalized plan to help you identify financial goals and get you where you want to go in life.

Find an Advisor

Market Data powered by Wikinvest. Data is provided as-is, delayed, and subject to Terms