As 2016 winds down, the usual year-end activities begin popping up: Thanksgiving, end-of-the-year work projects, the holidays. It can sometimes seem crazy and overwhelming.
In the midst of those months, it may be easy to overlook some of the tasks you can complete to end the year in a powerful way, so put these five steps on your radar right now. Get these money moves out of the way before the end of the year gets crazy, and you won’t have to worry about them during the busy holiday season, when you’re overwhelmed with the demands of both personal and professional life.
[See: 10 Foolproof Ways to Reach Your Money Goals.]
Contribute to your retirement plans. The more you contribute to a pre-tax retirement plan before the end of the year, the less you’ll pay in taxes next April and the more you’ll have set aside for retirement. So, it makes sense to consider bumping up your contributions to your traditional IRA or to your 401(k) before the end of the year.
Every dollar that you contribute to a pre-tax retirement plan, such as a traditional IRA or 401(k), reduces your taxable income by a dollar, which results in a lower tax bill for you. Take advantage of that in the coming month or two and boost your contributions to your 401(k) or IRA.
[See: 8 Ways You Can Prepare Now for Next Year’s Taxes.]
Donate to charities. If you’re already itemizing your taxes — if you’re paying down a home mortgage, for example, you’re probably already doing so — then charitable donations reduce your taxable income as well. And a lower taxable income results in lower income taxes.
In addition, many charities can really use your donation at this time of the year. That’s especially true when you donate in advance of the holiday season, so that your gift can be put to use during the holidays. Consider a donation to your local food pantry, soup kitchen or Toys for Tots programs, which work with families in need during the holidays.
Spend any remaining money in your flexible spending account. Flexible spending accounts are tax-advantaged accounts for money that can only be used for medical expenses. However, money in those accounts is “use it or lose it” money — if you don’t spend it, it just goes away.
Many such accounts empty out at the end of the calendar year, so if your health care plans include a flexible spending account, go in for a checkup and make sure that your prescription medications are up to date before the end of the year. In fact, schedule that appointment a little early, so that if any tests are needed, the money in your flexible spending account can help with the cost.
[See: 11 Expenses Destroying Your Budget.]
Contribute to 529 plans for the future college students in your life. 529 college savings accounts are powerful tools for putting aside money now for future educational expenses. They can benefit both kids and adults who might consider returning to school in the future. They offer great tax advantages if you use the money in those accounts for educational expenses, but they also offer advantages for state income taxes in many states.
If you’re in a state where you can earn tax advantages for donating to a 529 plan, make sure you donate to the plans for those who are important in your lives: your children, grandchildren, maybe even your spouse or yourself. Not only will those donations help them over the long term (and potentially make for a very nice holiday gift), they can also help you with your taxes this year.
Sell losing investments. If you’re holding onto an investment that’s lost value since you bought it, selling it actually reduces your taxable income by the amount of value lost. So, the end of the year is a great time to sell off some losing investments, particularly if this year happens to be one where you earned a lot of money.
Another strategy is to sell off losing investments at the same time as winning investments so that they effectively cancel each other out in terms of income tax. That can end up being quite valuable during tax season, and right now is the time to start looking at them. If you’re not sure, call your accountant or tax preparer. Not only are they likely less busy at this time of the year, but they can actually give you some great timely advice.
Make these moves in November, before the end of the year gets crazy, and you’ll be able to rest easy during the busy holiday season.
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Complete These 5 Tasks to End 2016 on a Financial High Note originally appeared on usnews.com
