December… Your final chance to take action to reduce your income taxes. This year there is an additional reason to act. It is likely that next year we will see both tax rates and the tax deductions reduced. That makes deductions that you use this year more valuable.

Here are a few deductions that are easy to use that you can discuss with your accountant or with us:

1. If you are working, consider additional contributions to a retirement plan. Even if you are subject to required minimum distributions, tax — deductible contributions may be allowed. This is a unique area where contributions for 2016 may be made during 2017 before your tax returns are filed.
2. Pay medical bills and 2016 State income taxes in December.
3. In personal accounts (as opposed to retirement accounts), sell securities with losses to bank the loss.
   a. The loss can be used to offset up to an equal gain this year.
   b. Any excess loss up to $3,000 will reduce your ordinary income this year.
   c. Any loss not used will carry forward and can be used against capital gains and $3,000 of ordinary income in future years.
   d. This process continues indefinitely until the loss is used up.
4. Maximize Deductions for Charitable Contributions:
   a. Make deductions in December.
   b. If you need to take Required Minimum Distributions (RMDs) or unrequired distributions from a retirement plan, consider making part of the distributions directly to a charity. The tax benefit is larger than if you take the cash and then donate it to a charity.
   c. Contribute appreciated property to a charity. You deduct the full value of the contribution without ever paying taxes on the gains.
   d. Consider a Donor Advised Charitable Fund (e.g., Fidelity’s fund). Contributions made this year are deductible this year. You control the distributions over time.
5. We would also like to start a policy of introducing smaller local charities in any locations near our clients. Your recommendations would be appreciated. We are starting with Together We Bake in Alexandria. You can see their website at togetherwebake.org.

Sincerely,

Katz Family Financial