Wealth Management

There has been quite a bit of uncertainty created by the elections this year. It is important to keep an eye on any law changes that may impact you for federal and state tax. As we near the end of the year, take a moment in December to plan for your finances so you can start the New Year with peace of mind. If this seems too daunting to accomplish in the next month, we strongly suggest you work with a financial professional.

Tax efficiency
◾ Income taxes: Estimate your 2016 tax bill so you won’t be caught off guard when you file your taxes next year. If you are estimated to get a large refund, then you may be withholding too much from your paycheck. This is essentially an interest-free loan to the government until next spring. On the other hand, if you owe more taxes than you have withheld, then keep enough saved for your tax liability next year.

Federal income tax rate

◾ Investments: Holding actively managed mutual funds in a taxable account require some of your attention. Most active mutual funds will pay out capital-gains distributions towards the end of the year. This is income that may increase your tax liability. Keep an eye out for these distributions so you are not surprised come tax time. If you need ways to reduce your tax bill, consider harvesting some losses. Always check with your tax professional before you do. They will be able to tell you how much or if this works in your particular situation.

Long-term capital gains

Retirement planning
◾ Saving: Review your 401(k) contributions for 2016 and maximize as much as possible. Business owners have several options beyond a 401(k) to save for their own retirement and should work with a professional to determine the best option.

2016 Retirement plan limits

◾ Distributions: If you are over the age of 70 ½ remember to take all your RMDs by the end of the year. Failure to take an RMD will trigger a 50 percent excise tax on the value of the RMD. Individuals that give to charity may consider taking advantage of qualified charitable distribution (QCD) rule. This allows a tax-free distribution (up to $100,000) directly from the IRA to the charity.

The gift of giving
◾ Family: Each person can give up to $14,000 a year per recipient as an untaxed gift. This amount is a use-it-or-lose-it rule and expires December 31st. If you have children or grandchildren, funding 529 plans with the annual exclusion is a great way to save for college. Any gifts above the $14,000 will consume part of your lifetime gift/estate tax exemption amount.

2016 Estate and gift tax limits

◾ Charity: If you itemize your deductions and need to reduce your tax bill, consider making your donation before December 31st in order to claim the deduction for 2016. The percentage of AGI a donor can deduct is limited based on the type of charitable entity and type of donation.

type of property dontated

◾ Benefits open enrollment: Around this time of year is the open enrollment period to select your company benefits for the next year. Generally, this is a passive process and your prior elections carry over to the next year. However, if your needs have changed you may want to revisit all the options available. If you have money left in your FSA don’t forget to spend this amount before the deadline.
◾ Last but not least, have a safe and healthy holiday season