As 2015 comes to a close there are so many things to do! There are gifts to wrap, meals to cook, cookies to bake, bonuses to earn, and perhaps some tips to take to improve your portfolio. Many advisors provide an annual review and make suggestions on how to improve performance and potentially gain tax advantages. However, the tips below are not simply for year-end but can be enacted year round.

  1. Making a charitable donation: As one of the easiest ways to cut your tax bill, making a donation by December 31st allows you to deduct the amount contributed. However, you must itemize your return in order to take advantage of this deductible benefit. Roughly 75% of Americans do not itemize. Talk with your tax professional to review your options.
  2. Rebalancing your portfolio: Keeping roughly the same allocation percentage throughout the year provides discipline to help you stick to your plan. However, rebalancing does not need to happen at the end of the year. If you are rebalancing then you should review the frequency and timing with your advisor as there can be tax implications in non-retirement accounts.
  3. Taking your required minimum distribution: Required minimum distributions (RMDs) must be taken each year beginning with the year you turn age 70 1/2 . You may face stiff penalties if you fail to take your RMD. Contrary to popular belief, you can take this distribution anytime within the year. You can take monthly distributions, quarterly distributions, or a lump sum distribution. You may also choose whether you would like to take it in cash or in-kind, meaning moving your assets from your IRA to your non-retirement account. Review your options with your advisor and be sure to discuss Federal and State tax withholding.
  4. Funding a retirement account: Funding an IRA is just one of the few retroactive tax breaks you can take! Contributions to IRAs may be made as late as the April following the tax year for which you want the contribution to count. For example, if you are over age 50 you can make a 2015 IRA contribution of up to $6,500 up until April, 15th of 2016. You can even contribute $13,000 to your IRA in the same month! For example, if you are over 50 years old by April 1, 2016 you can contribute $6,500 for 2015 (the previous tax year) and $6,500 for 2016 (the current tax year). Keep in mind that only the 2015 contribution will qualify for a 2015 tax deduction. Review the best strategy for your situation with your advisor.
  5. Harvesting your losses: In your non-retirement account, once you have matched your capital gains against losses, if you have excess losses you may deduct up to $3,000 of the excess against your ordinary income on an annual basis, with any further amount carried forward to future years. Work with your advisor and tax professional to review your options.

These strategies are best employed when working with an advisor and tax professional. Asking the right questions and taking full advantage of the services provided to you can make meaningful and long lasting impacts on your financial future.

Caroline Hill, Financial Advisor


(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp. The author's opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).