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    Financial planning: Be proactive with year-end ‘to do’ list

    Now is the time to consider selling losing investments, making charitable donations

    Joel M. Blau, CFPJoel M. Blau, CFP Ronald J. Paprocki, JD, CFP, CHBCRonald J. Paprocki, JD, CFP, CHBC


    What can I do proactively for my financial plan as we head into year end?

    As we approach the end of the year, take the necessary time to review your financial planning strategies. A lot can happen in a year. If your personal life, market conditions, or tax circumstances have changed, you may need to revise your long-term financial plans.

    Related: Diversify your portfolio with zero coupon bonds

    Do you own stocks and other marketable securities outside of your retirement accounts that have lost money? If so, consider selling those losing investments to lower your 2016 tax bill. This strategy allows you to deduct the resulting capital losses against this year's capital gains. If your losses exceed your gains, you will have a net capital loss. You can deduct up to $3,000 of net capital loss (or $1,500 if you are married and file separately) against ordinary income, including your salary, self-employment income, alimony, and interest income. Any excess net capital loss is carried forward to future years and puts you in position for tax savings in 2017 and beyond.

    Suppose you are fortunate enough to have the reverse situation: You own stocks and other marketable securities (outside of your retirement accounts) that have substantially increased in value since they were acquired. Taxpayers in the 10% or 15% income tax brackets can sell the appreciated shares and take advantage of the 0% federal income tax bracket available on long-term capital gains.

    Giving qualified-dividend-paying stocks to family members eligible for the 0% rate is another tax-smart idea. But before making a gift, consider any gift tax consequences. The annual gift tax exclusion is $14,000 in 2016 (the same as 2015). If you give assets valued at more than $14,000 to an individual (or $28,000 to a married couple) during 2016, it will reduce your $5.45 million gift and estate tax exemption, or be subject to gift tax if you've already used up your lifetime exemption.

    Next: Charitable donations

    Joel M. Blau, CFP
    Mr. Blau is chief executive officer of MEDIQUS Asset Advisors, Inc., in Chicago. He can be reached at 800-883-8555 or [email protected]
    Ronald J. Paprocki, JD, CFP, CHBC
    Mr. Paprocki is chief executive officer of MEDIQUS Asset Advisors, Inc. in Chicago.


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