Reduce tax turkeys with these easy November tax moves
Wednesday, November 02, 2016
It's November. You know what that means.
Yes, the presidential election will be over next week.
But November also means that we have two months to make some tax moves to ensure we don't encounter any tax turkeys.
Don't be gobbled up by tax concerns. Make these November tax moves. (South Park/Comedy Central turkeys via GIPHY)
Health care considerations: November kicked off with open season for Affordable Care Act, aka Obamacare, enrollment.
If you don't get medical insurance at work, you should check out the Health Care Marketplace for coverage. You'll need minimal essential coverage or you'll owe a tax penalty. Of course, you also might quality for the advance premium tax credit to help you pay your policy's cost.
As for your workplace plan, if you have a medical flexible spending account, or FSA, start looking now at how to spend down that tax-favored account.
Yes, some bosses allow FSA owners to roll over up to $500 into next year's account. Other offer a grace period until next March 15 for the prior year's FSA money to be spent. But just in case you must use or lose your FSA money by Dec. 31, plan your medical treatments now so you don't face end-of-year panic spending.
Taxes and the election: Will you have to worry about Obamacare and its tax implications in 2017 and beyond. The answer could depend on next week's election.
Democratic presidential candidate Hillary Clinton wants to maintain the current health care law, but "fix it … build on its successes and go even further to reduce costs." She wants to crack down on drug companies that charge excessive prices, slow the growth of out-of-pocket patient costs and provide a new credit to those who have high health expenses.
Her Republican opponent, Donald J. Trump, says Obamacare has failed on both cost and quality levels and must be repealed. He's calling for "a patient-centered healthcare system" that would include the sale of health insurance across state lines and a tax deduction for the health care premiums that individuals pay.
You also should check out Clinton's and Trump's other tax proposals, some of which they shared during their three debates, before you head to your polling place.
Take stock of your portfolio: The election also is causing some turmoil in the stock market. Since the 2016 race for the White House still is shifting in some key Electoral College states, market mavens are uneasy. They don't like uncertainty and it's showing in the seemingly daily exchange ups and downs.
After the votes are finally counted, we should have at be more clarity about where investments are going. That's also a good time to evaluate your holdings and decide if you have some stocks you want to cash in while they're doing well or drop because they never lived up to your original expectations.
In either case, there are taxes to think about.
When you sell assets that are doing well, you can harvest your gains. This could offer two tax advantages.
First, if you've held the investment for more than a year, the profit you pocket typically is taxed at a lower capital gains tax rate.
Second, if you think the asset will keep doing well and you want to keep it in your investment mix, you can rebuy it. This will reset your basis so that as the stock's value continues to appreciate (just like you knew it would!), you'll have a larger basis to use in calculating your future profits when you sell it again.
On the other hand, when you sell a stock that's now less worth than what you paid for it, that capital loss can come in handy at tax time. You can use the loss to offset any capital gains you take. And if you have more losses than gains, you can use up to $3,000 to claim again your ordinary income.
Note, however, that if you find you're always taking losses, your financial adviser might be a turkey and it could be time to hire a new one!
A group of wild turkeys is known as a flock. The domesticated counterpart, however, is called a gang of turkeys. Yeah, I'm as perplexed as this bird. It sounds like the terms should be reversed. (Science Friday image via GIPHY)
Turkey is for Thanksgiving, not taxes: These are just a few suggested tax actions to take this month so that your turkey is limited to the annual meal you share with all those family members you haven't seen in ages.
You'll find more November Tax Moves in the ol' blog's right column, under the bright red heading of the same name, just below the countdown clock ticking off the time left in the 2016 tax year.
Check them out and take advantage of those that meet your tax needs.
Then focus on Thanksgiving and its traditional bird without worrying about any tax turkeys that could cost you at filing time.
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