Trying to accurately predict the movement of the financial markets is akin to predicting the weather. No one really knows, and we have to wait to see what actually happens.
Even as you look at a fresh 2017 calendar, you may still be able to make one or two strategic tax moves for 2016. But they must be made by the national filing deadline, which falls on Tuesday, April 17, this year.
HSA contribution: If you had a high-deductible health plan in 2016 and didn’t contribute the maximum amount allowed to a Health Savings Account (HSA), you may do so and designate it for 2016. To qualify for an HSA, you must have had a health insurance plan with a minimum deductible of $1,300 for an individual or $2,600 for a family. Maximum out-of-pocket costs could be no more than $6,550 for an individual or $13,100 for a family. The maximum contribution to an HSA for 2016 was $3,350 for an individual or $6,750 for a family, with a $1,000 catch-up contribution for anyone 55 or older.
IRA contribution: If you are younger than 70½, still working and you or you and your spouse aren’t covered by a qualified retirement plan, such as a 401(k), you can contribute to a traditional IRA, regardless of your income for 2016. If you are covered by such a plan, your adjusted gross income (AGI) must be below $61,000 for a full deduction as a single filer or $98,000 as a married couple filing jointly. If you’re not covered, but your spouse is and you file jointly, you must make less than $184,000 combined to take a full deduction. The maximum contributions an individual could make last year were $5,500 or $6,500 for those 50 or older.
If your income and circumstances qualified last year, you may still make your 2016 contribution to a Roth IRA. For 2016, a single filer who made less than $117,000 and married joint filers who made less than $184,000 could make full contributions. Roth contributions are post-tax; contribution limits are the same as traditional IRAs.
Back-door Roth contribution: If your AGI doesn’t qualify for a Roth, you might consider using a back-door method to contribute. Regardless of income, you may make post-tax contributions to a traditional IRA and then immediately convert the account to a Roth IRA. However, if you have an existing traditional IRA funded with pre-tax dollars, your tax benefit will be reduced. Converting an existing IRA account that has gained value will also require tax payments.
We would be happy to work with you and your tax professional to help you find beneficial solutions for your situation. Call our office to schedule an appointment with us, 760-934-3087.
Until next time….
Securities America and its representatives do not provide tax advice; coordinate with your tax advisor regarding your specific situation.