The end (of 2015) is near. Still, you can do a lot to help your finances before the ball drops on Thursday and we ring in the new year. Let’s look at some of my top year end tips –
- The Charitable RMDÂ is now an option that will be available every year. This part of the tax code allows those who are 70-1/2 and taking RMDs from their IRA to donate directly to a charity. In effect making a donation deductible even though the donor doesn’t itemize. This code needed to be renewed each year, but recently, congress made this rule permanent.
- If you are retired already, and are not too close to the next tax bracket consider a Roth conversion to “top off” your current bracket. Say you are at a taxable $65K. You have an additional $9,900 you can withdraw or convert to Roth, and pay just 15%. By converting to Roth, you help to keep from breaking through the 25% rate as your withdrawals increase in the future.
- Do you have an FSA (flexible spending account) at work? If there’s a bit of money left, you should consider a quick purchase, typically, eyeglasses come to mind as they are an easy expense, and have a wide range of cost from simple reading glasses at $100 to a fancy pair of glasses well over $500. Don’t let that money get forfeited.
- Year end is good time to look at how much you are depositing to your 401(k) account. Can you bump the deduction up by a percent or two? You won’t regret it .
- Did 2015 bring you any change in family members? Marriage, new child, divorce,  family member pass away? It’s time for an annual review of the beneficiaries on all of your accounts. It’s never to soon to see if your new spouse has a former spouse of their own as a beneficiary. Pretty important to get that updated asap.
- Last, see if the Tax Loss Harvesting I wrote about can help you. You can read the full article, but the important thing to know now is that you can take stock losses against up to $3000 of ordinary income each year. Hopefully, your are making a profit, but this is an easy way to get a bit of money back on a stock you are holding at a loss and are wanting to sell.
That’s all for this year, Happy 2016
Joe,
Re “topping up” with RMDs, don’t those of us receiving SSA benefits need to consider the effect of additional taxable income on the % of SS benefits that become taxable ?
–Reed
Absolutely. This was a quick and dirty list of things to consider. In the long version of that advice, I’d discuss how social security is impacted, why this strategy is best used after retiring, but before you take the SS benefits, and details about recharacterization, “udoing” the conversion if at tax time you discover this wasn’t to your benefit.
This is on my list of topics to discuss in early 2016.
2015 was already gone. My bad luck Joe, I miss the opportunity to read in end of 2015. I will wait for the next topic. Hope it will come soon on the board.
All the descriptions on the Internet that I have found regarding the Qualified Charitable Distribution (QCD) rules that were made permanent last month say that the QCD must occur when the IRA owner IS 70.5 or more years of age, whereas all previous descriptions said that the QCD must occur in the YEAR in which the IRA owner turns 70.5 (or in following years). There is a difference between the two versions of the rule for people born in late June 1946 who turn 70.5 in late December 2016. In the new version, they must hustle in late December to get the IRA custodian to issue that check and get it to the charity by December 31, 2016; in the original version, any time in 2016 is OK. So, my query is: HAS the rule changed as described above, or are all the Internet gurus (e.g. Ed Slott Reports) not describing the new permanent rule correctly?
As an addendum to my query above, Publication 590b, revised January 4, 2016, says “You must be at least age 70.5 when the distribution was made.” So it might be that people born on June 30, 1946 will have one day to make a QCD. Of course, IRS Publications are not the law (even though the IRS likes to think so), and perhaps a correction will appear in later editions.