Tax considerations for the New Year

The tax man cometh. Time to prepare yourself to take all possible deductions.

Retirement accounts – Retirement accounts are a great method for reducing taxes. In fact,
the 401k and IRA were created give incentives for saving money. Each dollar contributed reduces taxable income.

401k — The annual limit of contributions is $18,000 ($24,000 for those over 50) and this amount does not include employer contributions.

IRA — The annual limit is $5500 ($6500 for those over 50)

College 529 — You can contribute up to $14,000 per year while still avoiding the gift tax penalty. While there is no federal tax deduction for this, many states allow a deduction for these contributions.

HSA (Health Savings Account) — Available to those with a high-deductible health insurance plan, the HSA allows one to contribute up to $3,350 for an individual and $6,750 for a family (add an extra $1,000 if you are over 55).
Charitable Contributions

For philanthropic individuals, charitable contributions are a great way to manage your tax burden while providing for those less fortunate or other worthy causes. In most circumstances, up to 50 percent of yearly income can be deducted each year for qualified gifts.

Something to consider when discussing charitable gifts is that they don’t have to be cash. Gifts of clothing, furniture, cars, household goods, stocks, property, and even mileage spent on behalf of the charity are all tax deductible at the end of the year for full or partial value.

Investment Strategy Checkup – Year-end is a great time to rebalance portfolios for a couple of reasons: Rebalancing should be done periodically to ensure that one’s portfolio has not skewed too far in one direction during the year’s ups and downs.

It could provide opportunities for tax-loss harvesting to help offset any capital gains earned during the tax year.