As the end of 2015 approaches, here are some year-end tax tips that may help you save some of your hard-earned money.
• Tax harvesting – This is one way to turn a curse into a blessing. If you have an investment with large capital gains that you haven’t wanted to sell for tax reasons, just look to see if you have another non-retirement investment that is underwater. If you sell both investments, you can use the losses in the poor-performing investment to offset the gains of the good performer.
• Lost a job or retired early – You may consider a Roth conversion if your taxable income is low. Low-income years can result in more deductions than taxable income, which means that you may be able to convert part or all of an IRA into a Roth without much tax consequence.
• Roth conversions – If you have been contemplating converting money from an IRA into a Roth for 2015, just remember that the conversion has to take place before the end of the year.
• Watch for approval of Qualified Charitable Distributions (QCD’s) – Congress hasn’t approved QCD’s yet, and they may not this year. They have a history of waiting until the last minute. If congress does approve QCD’s and you are over age 70.5, you can donate part or all of your Required Minimum Distribution to a charity. This donation reduces your taxable income and may mean that less of your Social Security is subject to tax.
Smedley Financial and its advisors do not provide personal tax advice. It is important to coordinate with your tax advisor regarding your situation.