Start your application now and choose your investments.
Free online investment help is just a click away.
By Al Chingren
December’s almost over, but you still have time to make smart year-end tax decisions. While your tax bill alone shouldn’t drive year-end investment transactions, you can use the remaining time this month to get your tax affairs in order before next year’s filing and get ahead of some Dec. 31 deadlines.
Here are five ideas that might help reduce your tax bill or boost your refund next year.
When you take money out of taxable investments, you'll end up with a capital gain or loss, depending on whether you made or lost money on the sale. If you made money, you’ll owe additional taxes on the amount over your cost basis.
But you might be able to lower your tax bill if you use losses on another investment to offset your gains,1 a strategy known as “tax-loss harvesting.” Talk to your tax advisor to see if this might be an option for you.
Investing in Traditional or Roth IRAs provides tax advantages. While you can make IRA contributions up until next year’s Tax Day, investing now means more time for your money to grow. And if you're eligible, you may also be able to use Traditional IRA contributions as a tax deduction.
If you're over age 70½, you’ll need a plan to take required minimum distributions (RMDs) from retirement accounts by year-end. Any remaining RMD amount not taken by Dec. 31 could be subject to a 50% percent penalty.
Additionally, make sure you keep track of the tax amount being withheld with each redemption to avoid underpayment.
You can also use RMDs for qualified charitable distributions. Instead of taking all or part of your RMD, you can send IRA funds directly to a charity or non-profit of your choice. The RMD will not be taxable, and you won’t get a charitable deduction. However, this strategy does reduce your taxable income and adjusted gross income. Consult a tax advisor for details.
Unlike IRAs, 529 education savings plans require that contributions be made by year-end to qualify for the state deduction , if applicable. Anyone who contributes to your student’s account—related or not—may be able to take a deduction, depending on their state's tax laws.
Making smart decisions now can help you save on taxes before time runs out. And, the more you save, the more you can invest toward your investment goals.
Want more tax-planning tips? Here’s a longer list of tax strategies that can help take the sting out of your tax bill.
1 Long- and short-term capital gains are taxed at different rates. Long-term gains may only be offset by longer-term losses. Likewise, short-term gains may only be offset by short-term losses.
It's important to teach your college-bound student the basics of financial literacy. Here's what they should know about money and personal finances.
The roller-coaster ride of 2018 provides important reminders about market behavior—particularly after several years of consecutive returns.
December 28, 2018
If your aging parents are struggling financially, learn how to help to get them back on their feet.
The rules for women and men are the same, but your strategy shouldn't be.
March 21, 2019
Debt, taxes and Medicare—learn how they may impact your social security check in part two of our social security series.
November 07, 2017
When it’s time to stop working, don’t retire your budget too. A good budget plays a critical role in helping you not run short on money.
Please consult your tax advisor for more detailed information regarding the Roth IRA or for advice regarding your individual situation.
Taxes are deferred until withdrawal if the requirements are met. A 10% penalty may be imposed for withdrawal prior to reaching age 59½.
IRS Circular 230 Disclosure: American Century Companies, Inc. and its affiliates do not provide tax advice. Accordingly, any discussion of U.S. tax matters contained herein (including any attachments) is not intended or written to be used, and cannot be used, in connection with the promotion, marketing or recommendation by anyone unaffiliated with American Century Companies, Inc. of any of the matters addressed herein or for the purpose of avoiding U.S. tax-related penalties.
This information is for educational purposes only and is not intended as tax advice. Please consult your tax advisor for more detailed information or for advice regarding your individual situation.
IRA investment earnings are not taxed. Depending on the type of IRA and certain other factors, these earnings, as well as the original contributions, may be taxed at your ordinary income tax rate upon withdrawal. A 10% penalty may be imposed for early withdrawal before age 59½.
The opinions expressed are those of American Century Investments (or the portfolio manager) and are no guarantee of the future performance of any American Century Investments' portfolio. This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.
American Century Investments is not responsible for and does not endorse any comments, content, advertising, products, advice, opinions, recommendations or other materials on or available directly or via hyperlinks from Facebook, Twitter or any third-party website. Facebook, Twitter and LinkedIn are registered trademarks of their respective owners.