Financial Planning & Retirement Planning Blog

Year End Tax Planning

11/23/2016

With the end of the year approaching now is the time to look for opportunities to save on income taxes. Here are some items you should look for.

Determine whether bunching deductions into 2016 or 2017 will enable you to itemize.
Maximize the $14,000 per donee annual gift tax exclusion if estate taxes are a concern
Maximize contributions to retirement plans
Look to offset any capital gains with any losses you might have, don't forget you can claim an extra $3,000 per year in losses over gains
Estimate income and deductions year-to-date. Consider if accelerating or delaying income can reduce your tax bill
If you are over 70 1/2 and have not taken you required minimum distribution from an IRA, consider making a direct contribution from your IRA to a qualified charity
Homeowners can claim a credit of up to $500 for energy improvements (limited to $200 for windows) but only if completed before 12/31/2016
If you will be paying college tuition in 2017, consider making a contribution to your state's 529 plan in 2016, if the state allows a deduction for 529 plan contributions

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Over the last 80 years the stock market has advanced an average of 10% each year, but average is not normal when it comes to the stock market. The table pictured on the left shows the actual returns for the S&P 500 each year since 1975.
How many of those returns were 10%? How many fell between 9% an 11%? Not many were even close to average.

So while you may be hoping for your investments to look like this.

You will likely experience something like this.

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Year End Tax Planning

Average is not Normal

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