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Things to Consider for Your “To Do by December 31st” List

By Carolyn T. Walder

It is that time of the year again when thoughts turn to the holidays and the New Year.  It is also time to address your end-of-year planning if you have not done so already.  Though we discuss many of these issues with our clients, as a reminder, we want to provide a list of items to think about that may be on your “to do by December 31st” list.

  • Tax planning moves, like tax loss harvesting, should be considered, particularly if you are trying to offset other income that you may have this year.  Although the market is up over the past month, you may have some capital losses to take.  Any losses may be worth more this year, particularly if you can offset some of your ordinary income (up to $3,000) if the new Congress and administration are successful in lowering tax rates next year.
  • Roth individual retirement account (IRA) conversions—If you are considering a Roth IRA conversion, it needs to be completed prior to December 31 to count for this year.  If you have less income and a lot of deductions this year, then converting some of your IRA may be one way to avoid leaving “tax dollars on the table.”
  • If you are at the age when the government requires that you take the required minimum distribution (RMD) from your IRA, then you must ensure that this minimum amount has been withdrawn by December 31st, or you will incur a very steep 50% penalty of the amount that should have been withdrawn.  If you have multiple IRAs, you are not required to take a distribution from each one, but you must ensure that you have taken enough to cover the amount that is calculated on your combined IRA balances. *However, it is different for 401(k)s. If you have multiple 401(k)s, the required minimum distribution must be withdrawn respectively from each account.
  • If you are subject to RMD rules this year and you are charitably inclined, you could donate all or part of your RMD to charity in the form of a Qualified Charitable Distribution (QCD).  A QCD will minimize or eliminate this tax liability, although you would be unable to claim the same donation as an itemized deduction on your Schedule A of your Federal Form 1040 tax return.  The rules are stringent: the distribution must be made directly to the charity, and it cannot be distributed to you first for subsequent payment to the charity.
  • If you make annual gifts to children or others to take advantage of the annual exclusion amount from gift and estate taxes, you have until December 31st to complete these gifts.  The amount this year is $14,000, and it will remain at $14,000 for 2017 as well.
  • If you participate in a flexible spending plan at work (Section 125 Cafeteria Plan), remember that you need to spend this money before the end of the year to avoid forfeiture.  Allowable expenses include stocking up on over-the-counter medications, eyeglasses or contact lenses, as well as routine procedures, such as dental and vision checkups.

This time of year is always busy with the hustle and bustle of the holiday season; however, we suggest that you take a few minutes to review your finances and look over this list to see if anything applies to your situation.  Of course, we encourage you to call Lifetime Wealth to discuss any concerns or questions you may have with regards to your financial circumstances!

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