Preparing for Taxes – End of Year Checklist

Posted 4 years, 4 months ago


As we start to settle in for the holiday season many of us look forward to the festivities, great meals, and spending time with our loved ones. As much as we all look forward to these enjoyable events there is one item that usually gets pushed to the back burner….tax planning. However, a little bit of prudent planning could yield substantial savings that could be utilized for something a bit more cheerful than paying Uncle Sam. Perhaps next year’s holiday budget? Here is a quick end of year checklist to help you avoid the post-holiday tax man blues and stay on track financially.

  1. Charitable Contributions: Tis the season to be giving? Charitable contributions can be a win/win proposition. You get the satisfaction of making a difference while simultaneously reducing your tax burden. Stretched for time and not sure who or where to contribute? No problem, a donor-advised fund can allow you to make irrevocable contributions this year, receive an immediate tax benefit, and at a later time decide where the monies go. And let us not forget that any charitable contributions that are disallowed because of limitation with respect to AGI can be carried forward for five years and may be deducted on future returns.
  2.  Retirement Accounts: There are two sides of the coin when it comes to retirement accounts. First, if you are not retired, you can certainly manage your tax liability by taking advantage of a traditional Individual Retirement Account (IRA), an employee sponsored retirement account, or both. Depending on one’s marginal tax bracket this can amount to significant tax savings. On the other side of the coin if you are retired and you or your spouse are 70 1/2 or older, Required Minimum Distributions (RMDs) must be taken before December 31st to avoid a 50% penalty tax. Don’t forget to take your RMD!
  3. Deduction Clustering: Did you have an unusually good year? Are you looking to beef up some itemized deductions and foresee a tame year to come? One strategy that could be used is early payment of mortgage interest. With this strategy the first mortgage payment of the next tax year can be paid in the current year, thereby, accelerating the mortgage interest deduction for the current tax year. Similar strategies can sometimes be utilized for state income and property taxes.
  4. Asset Allocation: It is almost always a good idea to examine your asset allocation at least once a year. Have you entered a new season in life and need to dial down the risk? Perhaps you received an inheritance or some other wind fall that enables you to be more aggressive. Unfortunately, many people neglect this area and end up experiencing returns or volatility that are inappropriate for their goals. One young individual I knew had been contributing to his government sponsored retirement plan for over 10 years when he realized his money was going to the safest, and hence lowest returning, asset class available. Needless to say, he was disappointed when he realized his error. It certainly pays to make sure your investments are properly allocated and diversified. (Asset allocation does not ensure a profit or protect against a loss. There is no guarantee that a diversified portfolio will enhance overall returns or out perform a non-diversified portfolio. Diversification does not protect against market risk.)
  5. Financial Planning: The end of the year is a great time to examine your family’s financial goals and make adjustments for the year ahead. For example, you could consider if you want to save more for retirement or a college fund. Perhaps a budget category is consistently over-budget and needs to be tackled. Or, maybe you need to plan for a large expense such as new car or roof for the house. A little bit of planning can go a long way in smoothing the financial road when it comes to the New Year and the tax implications involved.

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results.  This information is not intended to be a substitute for specific individualized tax advice.  We suggest that you discuss your specific tax issues with a qualified tax advisor. Investment advice is offered through The Gensler Group, a Registered Investment Advisor.

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The Gensler Group is Coronado’s premier boutique investment and financial planning firm. The firm was recognized in the “Best of Coronado 2015 by the Coronado Lifestyle Readers Poll. Best Wealth Manager, Dan Gensler, The Gensler Group. The Gensler Group is a dedicated team of professionals committed to providing clients with independent, objective, comprehensive wealth management and financial planning advice. For a complimentary consultation please visit or call us at 619-554-1300.

Visit us online at 120 C Avenue, Suite 170, Coronado, California, 92118

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