As the end of the year approaches, there are certain steps seniors need to take in order to maximize their tax benefits for the year. These are a few of the top moves you’ll want to consider making, but talk to your accountant before the end of the calendar year to maximize your potential for paying less and enjoying a greater tax refund.
Year End Tax Moves For Seniors
Make Sure You’re Taking Appropriate IRA Distributions
Holders of traditional IRAs must begin withdrawing minimum distributions from your IRA accounts by April 1 of the year after reaching the age of 70.5. Failing to do so could result in massive tax penalties of 50 percent of the amount that should have been withdrawn during that time.
Following the April 1 deadline of the first year, all other withdrawals must be made prior to December 31 annually. Don’t forget to ask your custodian to withhold taxes from your payments so that you’re not hit with an unexpected surprise at tax time. Holders of Roth IRAs are never required to withdraw money from their accounts; this requirement is exclusive to traditional IRAs.
Make Charitable Contributions
Giving is always a good thing. When you give monetary donations to charitable organizations, you can receive tax benefits in return. If you plan to give to your favorite charities in order to enjoy tax benefits for your upcoming taxes, it is important to make them during this calendar year. The holidays are a great time to give to many organizations that have greater than average need during this time, but you certainly do not need to wait until the holidays to make your charitable gifts.
Collect Your Deductible Expenses And Receipts
Documentation is critical when it comes to filing taxes. Take the time now to gather all the supporting documents for things like medical and dental expenses, tax credit documents, and other deductions. Keep in mind that for the 2016 tax year, medical and dental expenses must exceed 7.5 percent of your adjusted gross income if you are aged 65 or older (all others must exceed 10 percent of adjusted gross income) in order to qualify as deductions. The sooner you gather all the documentation, the clearer image you will have of your overall tax situation.
Make Sure Your Health Insurance Qualifies
If you have health insurance that fails to meet certain minimum coverage requirements set forth in the Affordable Care Act, you could be subject to penalties when you file your taxes. The sooner you get the minimum required health care coverage the better, because this penalty is assessed by the number of months you had inadequate health insurance coverage.
Getting ahead of the game is always a good plan—especially when it comes to your taxes. These moves will help you stay ahead of the game when tax season comes around.