Fall is the time to think of the leaves changinimages-3g, the weath­er turn­ing cool­er, and…taxes.  While the 2016 indi­vid­ual tax dead­line is not until April 15th, there are things that you should con­sid­er now that are just as impor­tant than that dread­ed dead­line.  Indi­vid­u­als file their tax­es on a cash basis, which means that most things need to be done before the end of the year.  Below are some sim­ple items to con­sid­er before year-end:

  • Max­i­miz­ing Your Retire­ment Con­tri­bu­tion – While tra­di­tion­al IRA con­tri­bu­tions and ROTH con­tri­bu­tions can be made after April 15, 401K con­tri­bu­tions must be made pri­or to Decem­ber 31st. Check with your employ­er about increas­ing your con­tri­bu­tion.  You can con­tribute up to $18,000 to your 401K plan for 2016.  If you are in the 25% tax brack­et and con­tribute the max­i­mum you will save $4,500 on fed­er­al income tax­es.
  • Con­sid­er A Roth IRA Con­ver­sion – Roth IRAs grow tax free and are tax free when with­drawn for retire­ment. Tra­di­tion­al IRAs and oth­er retire­ment plans are tax­able when with­drawn. You must pay tax­es on the amount con­vert­ed as ordi­nary income.  Pri­or to doing this, one of the things that you should con­sid­er is whether the cost of pay­ing the tax­es now out­weighs the ben­e­fit of income tax-free qual­i­fied dis­tri­b­u­tions in the future.
  • Char­i­ta­ble Con­tri­bu­tions – If an orga­ni­za­tion holds a spe­cial place in your heart and you are con­sid­er­ing mak­ing a dona­tion, be sure to do it pri­or to the end of the year to get the deduc­tion in 2016. Fall is also a great time to do some purg­ing of house­hold items and cloth­ing.  You are also able to get a deduc­tion for non-cash con­tri­bu­tions.  Make sure to get prop­er doc­u­men­ta­tion for all con­tri­bu­tions.
  • Bunch­ing Item­ized Deduc­tions – If your real estate tax­es are due in Jan­u­ary, con­sid­er pay­ing them in Decem­ber. This way you will be able to deduct the Jan­u­ary pay­ment and the Decem­ber pay­ment in 2016.  This also works with pay­ing your state and local tax lia­bil­i­ties pri­or to year- end, if you are not pay­ing alter­na­tive min­i­mum tax­es.  Some item­ized deduc­tions are only deductible if they exceed a cer­tain per­cent­age of your adjust­ed gross income (AGI).  Con­sid­er sched­ul­ing your cost­ly non-urgent med­ical pro­ce­dures in a sin­gle year to exceed the 10% AGI floor.  This could mean mov­ing a pro­ce­dure into next year ver­sus this year, or vice ver­sa.  Mis­cel­la­neous item­ized deduc­tions have an AGI floor of 2%, con­sid­er bunch­ing pro­fes­sion­al fees like legal advice and tax plan­ning.
  • Man­ag­ing Gains and Loss­es – If you have an invest­ment that has lost its val­ue, now might be a good time to sell. You are able to use that loss to off­set oth­er cap­i­tal gains that you have.  Short term and long term loss­es must be used first to off­set gains of the same type, but if your loss­es of one type exceed your gains in the same type, then you can apply the excess to the oth­er type.  Remem­ber though that you are only allowed up to $3,000 a year in cap­i­tal loss­es to reduce ordi­nary income.
  • Accel­er­at­ing Deduc­tions – Busi­ness­es are able to take advan­tage of Sec­tion 179, mean­ing that they can depre­ci­ate a fixed asset in the year that it was pur­chased. If you are con­sid­er­ing mak­ing a large invest­ment in fixed assets, pri­or to the end of the year might be the time to do it.
  • Defer­ring Income – There are some income items that you may be able to con­trol. Some items to con­sid­er are bonus­es and retire­ment dis­tri­b­u­tions.  The time val­ue of mon­ey can make defer­ring tax almost as valu­able as escap­ing it.