With the year end quickly approaching, you generally have until December 31 to take actions to impact your 2016 tax return. If you missed the April and extended October tax return filing deadlines for tax year 2015, now is also a good time to finally clear up lingering issues.
What steps might you want to take in these last weeks if planning ahead? In this post, we will examine a couple that could make a difference.
Max out charitable contributions
Charitable contributions, in general, can only be deducted in the year that they are made. But if you pay by credit card, you only need to be concerned about the date the gift cleared your account. It will not matter when you actually paid the credit card bill.
You are able to donate up to 50 percent of your adjusted gross income. If the gift exceeds this amount, you are generally able to carry forward the deduction for up to five years.
In our November blog, we wrote about Peace limitations for 2017. But the benefits from charitable donations may soon be more limited under proposed tax plans. President-elect Donald Trump’s plan would limit individual itemized deductions to $100,000 for individuals and $200,000 for couples. While it is unclear what will happen next year, it may be a good idea to accelerate gifts in 2016, if possible.
For retired taxpayers over 70 ½, distributions need to be made by year end. For those who turned 70 ½ during in 2016, you have until April 1, 2017 to take them.
Retirement contributions to workplace plans or Roth IRAs need to be completed by the end of the year. This might be a good time to review and top up these accounts. The limit for a 401(k) in 2016 is $18,000. Traditional and Roth IRAs have a limit of $6,500.
This is a time of the year for New Year resolutions as well. If you owe back taxes or have missed filing tax returns for a year or two, resolve to take care of these issues in the new year.