A Few Year End Tax Tips

A Few Year End Tax Tips

It's that most magical time of the year again.  No, not the holidays. It's your last month to do any tax planning for 2015.

For business owners, December 31 is the deadline for the establishment of Qualified Plans, including Individual/Solo 401(k) plans. For individuals, the completion of IRA conversions from traditional to Roth, and all 2015 retirement plan distributions must happen before that date, too.

If you are required to take Required Minimum Distributions from IRAs but haven't done so, don't wait until the last minute. Try to do it at least a week before year-end. That will ensure that there is cash in the account to actually make the distribution. Likewise, if your RMD has been met and you don't want to make another withdrawal, cancel it now but remember to set up a new one in 2016.

December is also the last chance to tax-loss harvest for 2015. Tax-loss harvesting is the practice of selling stocks, mutual funds, exchange-traded funds and other securities that are now worth less than what you paid for them. By realizing or "harvesting" a loss, investors are able to offset taxes on both gains from other investments and from income. These losses, which will normally occur in a well diversified portfolio, can offset gains in other investments you sell this year, or any time in the future since they can be carried forward indefinitely. The IRS also allows an annual offset of $3,000 against ordinary income. 

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