With the year end getting closer, we're all looking for tax-smart moves to improve our current or future tax picture. To help with this task, I have created a list of key portfolio-related tips you can quickly sort through when making your year-end tax plans.
It's obviously key to wait to see to what extent President-elect Donald Trump's proposals to reduce income-tax rates, get rid of personal exemptions, increase the standard deduction and repeal transfer taxes come to fruition. Yet with a Republican-controlled Congress, it's fair to expect tax reduction in 2017 and beyond.
Rest assured that the majority of the portfolio-related moves listed here can be considered without knowing the specifics of the tax breaks to come, as they are largely 2016 use-it-or-lose-it tax-reduction moves, or moves that prevent you from unnecessarily triggering taxes this year.
Here are some questions to ask yourself.
Did you work or did you have a working spouse in 2016? Consider maximizing retirement account contributions. Tax-deductible contributions allow you to save on a tax-advantaged basis and reduce your current income tax bill.
If you're a higher-income taxpayer, retirement contributions might also reduce your income below thresholds that may currently subject you to an additional 0.9 percent payroll tax, a potential additional 3.8 percent tax on net investment income and potentially limit your personal exemptions and itemized deductions.
If you have an employer-sponsored plan, ask your payroll department what additional amounts you might contribute to reach the maximum $18,000 (or $24,000, if you're age 50-plus) to a 401(k), 403(b) or 457(b) plan.