Are you in the midst of manic buying, wrapping, eating, drinking and being merry? It might not be top of mind, but there are just a few financial matters that you ought to consider before the ball drops in Times Square.
For the first time in a while, there are reasons for businesses and consumers to feel optimistic about future tax rates. It is tempting to think that with the incoming President, a tax rate cut may be imminent, but until a law is passed it is purely conjecture. Accordingly, use your best judgment and assume taxes will be consistent for now. Here are some good ideas:
#1 Look to sell investments in your taxable accounts (not retirement accounts such as IRA’s or 401K’s) that have generated a loss. These losses can be used to offset capital gains and a small amount of ordinary income, such as salary. If you want to ultimately keep the investment, you can repurchase after you sell but remember to wait 30 days. If you don’t, it will be considered a “wash sale” and you won’t be able to deduct the loss.
#2 This is an ideal time to maximize your retirement plan contributions, if you have not already done so. Contributions to 401k, 403b and similar plans yield valuable deductions. Keep in mind that IRA contributions may or may not be deductible – contact your CPA for further guidance.
#3 If you have a medial plan that includes an HSA savings account, be sure to maximize those contributions as well. For 2016, you can contribute up to $3,350 if you are single and $6,750 if you are married. An additional $1,000 can be contributed if you are 55 years old or older.
#4 Unfortunately, the state of New Jersey does not allow you to deduct 529 education plan contributions. However, if you have out-of-state sourced income, there may be an opportunity here. Consult with your CPA for further information.
#5 And, of course, pay expenses that qualify as itemized deductions:
a) Charitable contributions – check out our recent article on this topic: https://www.tapinto.net/towns/westfield/columns/a-little-bit-of-knowledge-with-david-tepp/articles
b) State taxes – if you have to pay any estimated taxes, pay the states before December 31 and you can deduct it in 2016.
c) Medical expenses – current laws make it difficult to deduct these expenses on your Federal return but you may have a fighting chance for your state return including New Jersey.
The more complex your personal financial situation, the more options may be available to you. You would be well-served to connect with your CPA and financial planner before year end.
From all of us at Tepp Accounting Services and Tepp Financial Planning, we wish you a very Happy, Healthy and Prosperous 2017!
The opinions expressed herein are the writer's alone, and do not reflect the opinions of TAPinto.net or anyone who works for TAPinto.net. TAPinto.net is not responsible for the accuracy of any of the information supplied by the writer. Click here to submit a Guest Column.