The Electoral College has confirmed new president-elect making great changes next year. For now, we still need to keep track of the routine things involved in bookkeeping and tax. Here are some quick steps:
1. Make charitable contributions before year-end
This is an exceptional way to reduce your tax burden for the year as well. Remember to look up the charity to see what they do with your donations. Also, the IRS imposes several rules for claiming a deduction for donation:
People must actually donate cash or property
People must contribute to a qualified tax-exempt organization
People must meet several recordkeeping requirements
2. Requirement Minimum Distribution (RMD)
If you are age 70 ½ or older, remember to draw RMD from retirement accounts. There are substantial penalties unless you draw the money in time.
You are entitled to draw up to $100,000 from your retirement account and transfer it directly to your charity.
This would make it possible to take RMD without paying taxes on the amount; however, you won’t get a deduction for the contribution.
3. Individual retirement account
Folks with too much money in their IRAs or retirement plans should consider transferring the funds to Roth IRAs, or cashing some of the money out. Take few computations to see how much you can transfer at lowest possible tax rate.
4. Balance out brokerage accounts
How much gains or losses can you harvest?
Are you in a low enough tax bracket that capital gains will be taxed at 0% or 15%?
5. Prepay certain routine bills
Pay January mortgage payment late in December – so payment covers most of the month’s accrued interest expense
Pay full property taxes, not just half
If you owe state taxes, make 4th quarter payment in December
6. People who are in business or use employee business deductions
Delay invoicing until January, so you can move income into next year. (No constructive receipt)
Make major equipment purchases before the end of the year.
Prepay January’s expenses, dues, etc. before the end of December.
7. SSNs and ITINs
Ensure that you have ID numbers for all eligible people in your household before filing tax returns. Without them, you stand to lose tax credits and tax benefits.
8. Health insurance, get insurance in place for all household members because penalties are high without coverage.