Year-End Checklist

Deadlines for Retirement Account Contributions and Distributions

401K Contributions – Under 50 up to 18000, over 50 up to $24000 (6K Catchup)

The 2016 contribution limits to most forms of retirement plans did not change from 2015:

  • 401(k), 403(b) and 457 plans – $18,000 ($24,000 for those over 50) are due 12/31/16
  • Traditional and Roth IRAs – $5,500 with $1,000 catch-up for those over 50 are due by the  4/15/17 tax filing deadline
  • SIMPLE IRAs – $12,500 due 4/15/17
  • SEP IRAs – $53,000 due 4/15/17

Keep in mind that your IRA limits may be lower if you or your spouse is covered by a company retirement plan and your AGI (modified Aggregate Gross Income) exceeds certain thresholds.

Deadlines for Required Minimum Distributions (RMD)

You have until April 1 of the year after you turn 70½ to take your first required minimum distributions from all retirement accounts (except Roth IRAs which do not require withdrawals until after the death of the owner). Subsequent distributions are due by December 31 of each year. If you take your first distribution from January 1st through April 15th of 2017, you will then be taking two distributions in the same year and RMD distributions are taxable.

Capital Gains and Losses

Review both your Schedule D from your 2015 tax return to see if you have any carry-forward losses and check your taxable investment accounts for capital gains or losses incurred during 2016.  While we like to sell investments based on the merits of holding that investment, the timing of a transaction could be affected by your tax situation.  Keep in mind that if you own mutual funds, your taxable income may bear no relation to your economic gains and losses.  You should be careful when purchasing mutual funds in taxable accounts before year-end as you can get hit with taxable income based on a distribution that can happen soon after your purchase.

Tax Rates and Expectations for Lower Taxes in 2017

If you are confident that the new administration will be successful in lowering your income tax rates for 2017, you could think about deferring capital gains or accelerating capital losses to offset gains by the end of the year.  This would result in having the taxable income hit a year later when you expect rates to be lower.  The deferral would allow you to retain and invest the cash for one year that would otherwise have gone to pay your 2016 tax bill.

The top tax bracket for 2016 is again 39.6%, although the income level at which that rate applies, like that of all other tax brackets, was adjusted upward for inflation. Beyond those annual inflation adjustments, there were no changes to the tax brackets for 2016.  To check where the marginal taxes rates kick in for 2016, you can go to

While there may be an incentive to accelerate state tax payments into the current year (see below), there is generally no such incentive for federal tax payments. Other than paying enough to avoid an underpayment penalty, the best cash management strategy is to defer the balance of the federal tax liability until the due date for the tax return. Keep in mind that requesting an extension of time to file a tax return doesn’t extend the time for paying the tax.

Charitable Donations

Be sure to complete any charitable obligations prior to year-end in order to take a tax deduction for 2016. Utilizing appreciated property, such as low cost-basis stock for contributions rather than cash can be a great tax savings tool.  Those gifts will generate a deduction for the full value of the property without having to recognize a taxable gain.

The law allows eligible taxpayers to make charitable gifts directly from their IRA and not have to report the withdrawal as income.  This is known as a Qualified Charitable Distributions, or QCD. Among the rules to keep in mind for these distributions are:

  • Taxpayers must be at least age 70½ at the time of the payment to the charity
  • The payment to the charity will count towards the taxpayer’s Required Minimum Distribution for the year
  • Direct transfers to charity from can only come from an IRA. QCD is not allowed from a SEP IRA, Simple IRA, or from an employer plan.

If you have any questions about these or other year-end tax planning tips, please don’t hesitate to call us.

We wish you all a wonderful holiday season and a happy and prosperous New Year!