Planning for the End of the Year

We are now in the final weeks of a very eventful year and before everyone settles in for the holidays we would like to provide some end of year financial planning pointers for American tax payers.

Proper financial planning is something that should be practiced year round, but there are certain periods throughout the year when certain items on the checklist matter more than others.  The beginning of the year is a good time to revisit your cash flow and budgeting while New Year’s resolutions are still strong-willed.  Spring brings April showers and tax planning for many, especially if you’re a US taxpayer.  For those of you in the UK this is also the end of the UK tax year.

The final months of the year are a good time to meet with your financial and tax advisors to discuss the past year and tie up loose ends before the end of the tax year.  Below is a list of items that a US/UK taxpayer should consider before the end of 2016 and discuss with their tax advisor to determine the suitability for their specific situation:

  1. Check your capital gains position/budget across your investment portfolios. With the steep fall of the pound versus the US dollar since June, you could have losses for US purposes but a UK taxable gain.  You may therefore wish to realize further gains/losses before year-end. Your financial advisor should be able to help you with this.
  1. Ensure that you pay your UK taxes (due 31st January 2017) before the end of 2016 so that you get full credit in the current US tax year.
  1. Take your Required Minimum Distribution from your IRA if you are over 70½ or have inherited an IRA. Otherwise you may be subject to a penalty.
  1. Make your US and UK charitable contributions by December 15th to ensure that you get credit in the current US tax year.

Unlike a cash donation, the gifting of shares to charity will not be eligible for Gift Aid Reclaim in the UK.

  1. If you have a non-American spouse and you have been using the $148,000 annual allowance to transfer assets to your spouse as part of your inheritance planning, remember that the gifts should be made in different US tax years.
  1. Each US only taxpayer can gift $14,000 tax free to anyone of their choice annually and to as many people as they want. The UK is far less generous and more restrictive in this respect.

The above list is a good starting point for most who pay taxes in the US and UK, but it is certainly not all-encompassing.  Regardless, now is the time to start a dialogue with your advisor so you can close out 2016 with financial peace of mind and start off the new year properly.

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