Last Minute Year-End Tax Savings Strategies

2015 is quickly coming to a close, and while many are busy preparing for the holidays and spending some relaxing time with family, it is important to take some time and ensure that you’ve optimized your taxes for the year. While everyone knows about making charitable contributions before year-end, there are a few other tax savings strategies that you may not be aware of. Here are a few options to consider before the end of the year.

Buying Mutual Funds:
Be careful investing in mutual funds at year-end. Typically, most mutual funds make their capital gains distributions at the end of December. If you invest in a mutual fund prior to the distribution, you may find yourself paying capital gains that you did not participate in. Waiting until after the capital gains distributions are made from the fund could provide a substantial benefit to you.

Harvesting Tax Losses:
The stock market has experienced a volatile year, notably with respect to lower energy prices. It may be a good idea to sell those funds that have experienced losses to offset any capital gains you may have.

IRA Contributions:
Although you have until April 15 to make a contribution to your traditional or Roth IRA Accounts (up to $5,500, or $6,500 if you’re over 50), it is important to make sure that the IRA Account is established by December 31st. Making a traditional IRA contribution is a direct tax deduction against your income, which can reduce your taxable income. If you’re able to contribute to a Roth IRA, the amount you contribute will not provide any immediate tax benefits, but the distributions will be tax free in the future.

Charitable IRA Rollover:
A Charitable IRA Rollover is a powerful year-end tax savings strategy. This is a charitable transfer program that allows clients to donate up to $100,000 to a charity directly from their IRA Accounts. This is a great strategy if your Required Minimum Distributions are more than what you need for living expenses, as the amount that you contribute is a tax deduction, and counts as your RMDs.

Annual Gifting:
If your estate is projected to be over the Federal Exemptions ($5.43 Million per person in 2015), it may be a good idea to start annual gifting to your heirs. You can give up to $14,000 per person, per year, per recipient, without cutting into your Lifetime Gift and Estate Tax Exclusions. The money could be given directly to the recipient, or into a trust that would provide them with access at a later date.

As the year comes to a close, our entire team at Wealth Planning Network wishes you and your family the warmest of holiday greetings!


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