UHY LLP Reports: Tax Savings Moves to Make Before Year-End

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Although the end of the year is quickly approaching, there is still time to implement some tax strategies that can improve your tax circumstances for 2016 and beyond.

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Although the end of the year is quickly approaching, there is still time to implement some tax strategies that can improve your tax circumstances for 2016 and beyond.

HSA contributions: Maximum yearly HSA contributions of $3,350 for individual coverage and $6,750 for family coverage (those age 55 or older also get an additional $1,000 catch-up amount) can be made before year- end to get the above-the-line deduction.

Stock losses: Consider selling losing stocks before year- end to offset capital gain income. If you would like to repurchase the “loss” shares, you must wait at least 31 days to preserve the loss that will be deducted in 2016.

Charitable contributions: Make charitable contributions before year- end to increase your itemized deduction in 2016. Consider contributing long-term appreciated securities to a qualifying charity. You will be able to deduct the fair market value of the securities as an itemized deduction without including the appreciation on the securities as income.

Medical expenses: Consider paying for planned medical expenses before year- end to increase your itemized deduction in 2016. Itemizing taxpayers age 65 and older can deduct medical expense to the extent they exceed 7.5 percent of adjusted gross income. This floor will rise to 10 percent in 2017.

Retirement plan distributions: Don’t get stuck with an underpayment of estimated tax penalty by increasing the tax withholding from these distributions. Also, taxpayers 70 and a half years old should make sure they have made their required minimum distributions (RMD) to avoid the penalty of 50 percent of the amount of the RMD not withdrawn.

IRA: Taxpayers that have reached 70 and a half years old may consider making a direct transfer of IRA funds (not to exceed $100,000) to a qualifying charity. While there is no deduction allowed, the amount is also not included in income, thus not increasing adjusted gross income for purposes of any phase-out of deductions or credits. Also by not increasing the adjusted gross income, depending on the state of residency, the direct transfer of IRA funds to the charity may not increase your state income tax.

Make year-end gifts: Individuals may gift up to $14,000 per year tax free to another individual. This is increased to $28,000 for donors and their spouses who consent to gift splitting.

Potential to earn tax-free gains: Individuals may exclude all (or part) of the gain realized on qualified small business stock held for more than five years.

Prepay qualified higher education expenses: Unless Congress extends, the above-the -line deduction for qualified higher education expenses will not be available after 2016. Consider accelerating educational expenses for the first quarter of 2017 into 2016.

Accelerate big ticket purchases: Individuals expecting large ticket purchases like a boat or a car should consider deducting sales tax in lieu of state and local income taxes as an itemized deduction in 2016.

State income taxes: Individuals that will not be in alternative minimum tax should consider paying any estimated tax payments by Dec. 31 instead of Jan .15, 2017.

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Chris Clark
UHY LLP
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