The end of the year is just around the bend, and with it comes a number of opportunities for smart financial moves as well as last chances to take advantage of financial benefits. Here are six things you should consider doing in the next few weeks.
Donate to charities. A donation to a charity is tax deductible, and that deduction comes straight off the top of your income taxes. If you’ve considered donating to a charity this year, now is the time to do it so you can take advantage of the deduction on your 2015 tax filings.
Charitable donations are especially useful for homeowners who itemize their tax returns because they’ll get the full benefit of the deduction. Tax payers without other deductions often find that the standard deduction is better for them, meaning charitable deductions don’t lower their tax bill.
Make last-minute retirement contributions. Now is the time to max out your annual contributions to retirement accounts to ensure their tax benefits help you in 2015 and that your contributions count against your 2015 contribution cap.
For example, in 2015, the annual contribution limit for 401(k)s is $18,000 (or $24,000 if you’re age 50 or older). If you’re below that limit, you’ll want to contribute more in December rather than in, say, January so that your contributions count toward your 2015 contribution limit rather than your 2016 limit.
If you don’t have a 401(k), there is no better time to start one than today!
Spend any cash left in your flexible spending account. If you have a health FSA, you’ll probably want to spend that money before Dec. 31, as any unspent FSA money goes away at the end of each year.
If you haven’t gotten an eye exam or dental checkup, or haven’t replaced your glasses or hearing aid this year, you may want to consider using any remaining funds in your account to take care of those expenses that are eligible for reimbursement.
Make 529 plan contributions for your children, your grandchildren or even yourself. A 529 plan provides a great way to save for college expenses. A contribution to a loved one’s 529 plan can be a great gift too, as it provides tax-free growth for college savings.
While 529 plan contributions are not federally tax deductible, most states offer state tax deductions or tax credits on that state’s 529 plan. Take a look at the plan available in your state, and, if it offers such deductions, take advantage of it to get started on saving for the high expense of college education.
Give financial gifts to loved ones. Each year, the federal government allows each person to make cash gifts up to $14,000 to another person without incurring any tax penalties. If you want to financially assist a younger relative or slowly start transferring your wealth to your children as you age, you may want to take advantage of this.
Overall, the $14,000 gift tax exclusion can help with estate planning, and you can couple it with another gift in January (against your 2016 limit).
Sell investments you’ve lost money on to balance out financial gains. Did you sell anything this year that earned capital gains? Stocks? Bonds? Investment real estate? Gold? If you did, and you also own investments that will be sold at a loss, you may want to go ahead and take that loss right now by selling those items.
Why? The capital gains tax you pay is a sum of your gains and losses for the year. So, if you made $10,000 on one investment that you sold and then had another investment that lost $10,000, you could sell that second investment and break even on paper for the year, owing no taxes on the $10,000 you gained from the first investment. You may want to contact your tax advisor for specifics, but December is the perfect time to make these kinds of assessments.
The end of the year provides many opportunities to save money, particularly on taxes. It’s up to you to take advantage of those opportunities for your own financial benefit.
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6 Financial Tasks You Need to Complete Before the End of the Year originally appeared on usnews.com
