When you are required to take required minimum distributions, you have the ability to designate those dollars (up to $100,000) to be gifted directly to a qualified 501(c)(3) charitable organization (with the exception of donor advised gift funds). By doing so, it will prevent the distribution from being included in your taxable income. This is a popular provision that was made permanent by Congress in 2015.


Think strategically about your various deductible expenses. For example, if you are able to meet the required minimums to deduct medical expenses, think about fitting in as many of those expenses (i.e., doctor visits, new eyeglasses, etc.) as possible before year end. Likewise, if you do not pay your real estate taxes through a mortgage escrow account, you may have some flexibility to decide if you want to make a payment prior to year-end or delay it into the new year.

Additionally, if you are making a fourth quarter state estimated tax payment and are not subject to AMT (alternative minimum tax), doing so on or prior to December 31st, will enable you to take the tax deduction on your 2016 tax return. As an example, assume you are in the 28% tax bracket and need to make a $1,000 state estimated tax payment. By making the payment in 2016, you will save $280 in taxes on your federal tax return.


“Harvesting losses,” is a strategy whereby you sell positions that are in a loss to offset capital gains that have already been realized. Remember, taxpayers are also able to deduct up to $3,000 of capital losses against their ordinary earnings when losses exceed gains, while any excess losses over $3,000 are carried over to the next tax year.


Maximize your charitable gifting, especially if it is a large income year. As long as any cash donations are in the mail or charged on a credit card by December 31st, you may take a deduction on your 2016 tax return. See the above discussion about an increasingly popular way to manage charitable gifting strategies. If you are thinking of gifting stock or mutual fund shares, contact the intended recipient organization as soon as possible to make sure they are able to accommodate your gift prior to December 31st.

Brendan Walsh
Senior Tax & Financial Planning Advisor
View Brendan’s Profile

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