Plan Your 2016 Taxes Now

The year is quickly coming to an end. However, before getting busy with holiday activities it would be prudent to consider you individual 2016 income tax picture now.  There is still time to make an adjustment or two that could make a difference.

Let’s take a look at a few.

Capital Gains and Losses – If stock has been sold earlier this year or you are considering some moves before year end and these stocks have a gain, review your portfolio and determine if there are any stocks that appear to be permanent losses.  If so consider selling those by the end of the year.  The losses can offset the gains and reduce or eliminate any taxes associated with those stock sales.  However, your financial advisor should be consulted before making any changes.

Pay State and Local Taxes- Most individuals are considered to be cash basis tax payers meaning that all deductions are recognized when the money is spent.  Therefore, paying all state income and local real estate taxes by December 31st would allow the deduction to be recognized in 2016 this includes estimated state income taxes.  For individuals that find it difficult to itemize consider making double property tax payments every other year.  This would allow itemizing every other year if the real estate taxes puts them over the threshold.  Most real estate taxes are due in January anyway so moving those up my help create a larger deduction and reduce the tax liability.

Delay distributions – If you take a retirement distribution in December consider delaying it until January.  That moves income out of 2016 and into 2017.  With the entire year to play with, there might be other things that can be done in 2017 that can minimize that income for 2017.

Premium Tax Credit – The Affordable Care Act (ACA) has been with us for several years now.  Even with all the talk about wishing it to be repealed it has it tentacles in too many places for that.  Instead the conversation should be centered on how to fix it.

If you purchased your medical insurance on the exchange you may have received a credit (reduction in premium) due to the income projected. If that amount is now too high there is a good chance you will loose the credit that has been received each month.  Going back to the exchange and adjusting your income will change the amount of credit at least for the last month or two.  If it is too late to make any changes then be prepared to pay some if not all of that credit back with the filing of your tax return.

For taxpayers without minimum essential coverage and do not qualify for an exemption will pay a higher penalty this year. The penalty is $695 for each household member over 18 not to exceed the bronze-level plan for the household size.

All taxpayers will receive a 1095 (-A, – B or –C) this year. That information must be included in with your tax return.  Make sure you receive yours by the end of January and that you put it in your tax documents.

These are just a few ideas. Consulting with your tax specialist for these or other suggestions could save some heart ache in April.