Year-End Tax Moves to Consider Now

You have some control over how much you pay each year in income tax.

Before the end of the year you should be reviewing a few of your options.

1. Selling securities that are worth less than what you paid for them in non-retirement accounts.

For example, if you invested in a mutual fund over one year ago and the cost basis ( your investment + any reinvested capital gain or dividends) and it’s worth less than the basis, you can sell it a take a long-term capital loss. That loss can be used to offset any long-term capital gains you may have this year. If the loss(es) exceed your gains you can subtract up to the first $3,000 on your tax return and carry any remainder over to next year. This is known as Tax-loss Harvesting.

2. Using QCD for RMD contributions. Make your charitable contributions a tax write off

If you are required (RMD) to take a distribution from your IRA and are making donations to charity, consider making a QCD – Qualified Charitable Deduction. If you make your qualified contribution directly from your IRA rather than from your checking account, that contribution will not be taxed.

For example: You take $1,000 from your IRA and deposit into your bank checking account. Then you write a personal check to your church for $1,000. That charitable contribution would only be used as a tax deduction if you itemize your deductions. Not many seniors itemize these days. If, instead, you request your IRA institution make the contribution directly to your church (many offer IRA checks for you to do this) then the IRA distribution is NOT taxable assuming it’s part of your RMD.

3. IRA Conversion to Roth IRA.

This move creates more income tax now in exchange for no income tax later. Whatever dollar amount you convert today to a Roth IRA will be added to your income tax as ordinary income (like salary). Why might you do this? Maybe you think income tax rates will go up in the future. The Trump Tax cuts expire after 2025. It’s also a form of income tax diversification. This would give you more options in the future allowing you to pull from a taxable IRA or a tax-free Roth IRA.  Lastly, your children heirs inherit the Roth and won’t have to pay tax on their distributions while that i not the case with Traditional IRA money. Click TIME TO CONVERT OLD 401K/IRA TO ROTH IRA

Click Here – Tax Moves Checklist Link – very helpful year-end tax moves checklist.

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