Tax Planning for retirees age 70.5 or older

Are you taking Required minimum distributions? If you want to reduce your taxable income this year, these tips are for you:

1. Accelerate any deductible expenses that can be paid this year rather than early next year.

2. If you are subject to IRA minimum distribution requirements, considering making gifts to charity directly from your IRA. This can be useful if your itemized deductions are limited or if you are below the standard deduction threshold and charitable contributions would otherwise not be deductible. If your Social Security benefits are taxable, the effect of not having to report the Qualified Charitable Distribution may lower the amount of Social Security subject to income tax

3. If you have any securities (or identifiable tax lots of securities) that can be sold at a loss before year-end the losses can be used to offset other gains and other income up to $3,000. Unused losses can be carried forward indefinitely until used up. The same securities that you sell can be repurchased after 30 days to establish a higher cost basis, or similar securities can be purchased immediately if you wish to maintain exposure to the industry of sector.

4. If you have a side business in retirement or work as a consultant and to generate self employment income consider making equipment purchases now to get the 100% expense write-off for depreciable property. This also works for LLC and S-corp business structures.

a. Consequently, if you do have a business you may be able to contribute to a 401k or SEP-IRA to reduce your taxable income.

5. Don’t give cash! Make charitable contributions using appreciated securities rather than cash. You get the same deduction as a cash contribution (up to the AGI limits) and avoid capital gains taxes on the appreciation and get a deduction for the full fair market value as of the day of the gift.

a. But don’t give “loss” securities away. See #2

6. If you have an especially large tax bill, consider establishing a donor-advised fund and gift several years of charitable contributions now. Better when using appreciated securities to fund the gift. Deductions for gifts of appreciated property are limited to 30% of adjusted gross income, but the excess can be carried forward up to five years.

7. Make a 529 college savings plan contribution for children or grandchildren and receive a state income tax deduction

a. You can see if your state has a tax benefit on this site: 529 Plans by State

8. Buy health insurance on the exchanges to qualify for the tax credit subsidy.

a. To receive the credit, you must sign up through the exchange. Learn more at

9. Make energy efficient home improvements. If you haven’t previously used up your credit then it may be worth 10% of the materials on windows, and 10% of the materials and installation costs on certain heat pumps, water heaters, etc. See IRS: Home Improvement Tax Credits for more information.

a. Anecdotally, we’ve found that adding insulation to your attic and using energy efficient windows and door will lower your heating and cooling costs.

10. Any other strategy which allows you to defer receipt of income or accelerate a deductible expense should be explored before the New Year.

investing for retirement ebook ipad - McClain Lovejoy
investing for retirement ebook ipad - McClain Lovejoy
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