Tags: holidays | hit | cut | irs | gift | list

5 Ways to Cut the IRS Off Your Holiday Gift List

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By    |   Friday, 13 Oct 2017 01:33 PM

After speaking with thousands of individuals over the years, we know that once the holidays hit, proactive financial and tax planning gets put on the backburner.

Many aren’t aware that that there are things you must do before December 31 to help save more on your taxes.

Unfortunately, waiting until tax season can leave you holding the bag, but proactively planning now can help you make the most of your tax return.

Here are some things to consider this October:

  • Charitable Giving: One creative, but often forgotten way to give is by donating appreciated securities instead of cash. By donating securities, you avoid the capital gains taxes you may have otherwise paid. For tax purposes, you get the full market value of the appreciated securities as a potential deduction and completely avoid capital gains tax liability.
  • RMDs: If you’re over 70½ and you have qualified funds, the government requires you to take required minimum distributions – otherwise known as RMDs. Based on the value of your qualified accounts and your age, the RMD amount can incur a 50% penalty if not taken out before December 31.
  • Roth Conversions: Roth conversions may or may not make sense for you, depending on your income and tax bracket. Checking out your adjusted gross income will tell you if a Roth conversion makes sense. Remember, you don’t typically want to take money to of your IRA or 401k if there will be a penalty, or if it bumps you to a higher tax bracket
  • Offsetting Gains With Losses: Something many people don’t know is that you can carry forward capital losses and offset your gains with them in future years. This means if you’re selling an asset where there will be capital gains – such as highly appreciated securities – consider offsetting these gains by selling underperforming securities. For example, if you have a year where you had a capital loss of $12,000 and capital gains of $10,000, this would allow you to offset those gains and have a $2,000 capital loss carry forward that you can use in the future.
  • Medical Expenses: Out-of-pocket medical expenses can be deducted fi they exceed 10% of your adjusted gross income. So, you're close to 10% for the year, see if there are procedures or appointments that could be done in 2017 to get you to that mark. By paying any outstanding hospital or doctor's bills now, you can include that on your 2017 return as an expense with tax benefits.

There are a lot of opportunities to save money in taxes, it’s just a matter of starting before it’s too late and working with the right team to help you do it.

There is a difference between tax planning, which happens once a year at tax time, and proactive tax planning year-round.

We encourage people to seek the help of a qualified financial adviser and CPA to discuss your specific situation.

Jeff Dixson is known as “The Retirement Coach” and is the founder and president of Northwest Financial & Tax Solutions, Inc. A respected financial educator, Jeff hosts a weekly radio show that airs on seven stations and is author of Winning The Retirement Game.

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Personal-Finance
After speaking with thousands of individuals over the years, we know that once the holidays hit, proactive financial and tax planning gets put on the backburner.
holidays, hit, cut, irs, gift, list
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2017-33-13
Friday, 13 Oct 2017 01:33 PM
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