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 Should you fail to do so, you’ll face a stiff penalty from the IRS: a 50% excise tax on the amount you should have withdrawn based on your age, life expectancy, and the amount in the account at the beginning of the year.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.
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