TAX PLANNING TIPS
Tip #1 – Speed Up Depreciation
Accelerated depreciation is a key concept for business owners to understand. Depreciation depends on the useful life of an asset.
Tip #2 – Maximize Deductions
Tax deductions allow you to pay smaller tax bills as long as the expense meets the IRS tax deduction criteria.
Tip #3 – Get A Second Opinion
Having an advisor evaluate and review your tax plans and decisions before the end of the year will prevent you from overpaying your taxes.
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As we ease into fall and the final months of the year, you may be thinking about year-end tax planning and charitable giving. Perhaps you’ve even taken action and reviewed the year-end checklist, or chosen the organizations you’d like to donate to.
Additionally, having a basic understanding of the complex concepts and changing rules will allow you to make better-informed decisions regarding your financial future. Here are a few examples to get started.
Limiting your tax liability with IRAs
For many American investors, saving for retirement means funding Individual Retirement Accounts (IRAs) and other employer-sponsored retirement plans. However, an IRA is not designed to shield savings from taxes indefinitely.
Consequently, when you reach the age of 70½, the IRS requires that you begin taking payments from your traditional IRAs, whether you need the money or not. These withdrawals are called required minimum distributions (RMDs).
The RMDs from your IRA are generally subject to federal (and possibly state) income tax for the year in which you receive the distribution. One way to potentially limit your tax liability on RMDs is to direct the distribution to a charity. Qualified charitable distributions allow clients to reduce their taxable income, achieve charitable giving goals and satisfy their required minimum distribution — all in one transaction.
Tax-free transfers to qualifying charities
If you have philanthropic goals, legislation signed into law at the end of 2015 might help you fulfill them. The Protecting Americans from Tax Hikes (PATH) Act retroactively restored for 2015 and made permanent the provision allowing tax-free transfers from individual retirement accounts (IRAs) to qualifying charities.
The PATH Act allows taxpayers subject to RMDs to exclude from their gross income up to $100,000 in qualified charitable IRA distributions for each tax year beginning after 2014. A qualified charitable distribution is any otherwise taxable distribution from a traditional or Roth IRA that is made directly by the IRA trustee to a charitable organization* on or after the date the IRA owner attained age 70½.
To help determine if this strategy would be advantageous for you based on your personal situation, make sure and contact a local management advisor and tax advisor.