It's That Time of the Year Again: 9 Ways to Get Ready for the New YearSubmitted by MIRUS Financial Partners on November 19th, 2017
New Years is only weeks away. It’s time to clean up your finances to make sure you’re not leaving money on the table, and to make sure you’re set for tax season.
Take note of these nine tips to get your financial house in order before time runs out on December 31st.
1. Got a Health Savings Account? Empty it.
All contributions added to a health savings account are 100% tax-deductible, as long as they’re made by the end of the calendar year. Here are the IRS limits for 2017:
Individuals can save up to $3,400
Families can save up to $6,750
Individuals 55-plus can save an extra $1,000
Can’t use it all this year? If you came in significantly under your contribution, you should think about lowering your contributions next year. You want a zero balance in this account on December 31.
2. Use all Flexible Spending Account Savings
If your company doesn’t offer a grace period or allow the funds to carry over to 2018, any money left in a flexible spending account at the end of the year will be lost. Generally speaking, you can use FSA dollars on the qualifying medical expenses listed in IRS Publication 502, but double-check your plan to see if there are additional ways to spend your FSA.
Not sure how to use-it-or-lose-it before the deadline? Here are some good candidates:
Get an extra pair of eyeglasses, prescription sunglasses or contact lenses. Or schedule LASIK surgery. If needed, get a hearing aid. Acupuncture, chiropractic care, weight loss program, stop-smoking programs, dental care and vasectomies are usually covered. Check your program.
3. Adjust Tax Withholding and Update Beneficiary Designations
If you got married, divorced, or had a child in 2017 you should adjust your W-4 withholdings. It’s not wise to over contribute, giving the government an interest-free loan, or under contribute, and having to write a check to the IRS. Also, use this opportunity to update their beneficiary designations.
4. Max out Your 401(k) Contributions
For 401(k), TSP, 403(b) or 457 contributions to be tax deductible in the 2017 tax period, they must be made by December 31. Wonder how much you can contribute tax-free?
- Workers under 50 can contribute up to $18,000 in 2017
- Workers 50-plus can make catch-up contributions up to $24,000.
- At the very least, contribute enough to get any employer match.
5. Consider a Roth Conversion
If you’ll be in an unusually low tax bracket this year, you may want to take advantage of adding income to your return through a Roth IRA conversion.
6. Donate to Charity
Been thinking about supporting a good cause? Are you at the bottom of a tax bracket, and lowing your income a bit saves on taxes? ’Tis the season to donate. To be included in 2017 tax returns, charitable contributions are due by December 31. As an alternative to donating cash, you may want to consider donating stock or mutual fund shares that have appreciated in value. By transferring stock or a mutual fund to a charity, you can avoid paying capital gains on the investment, and you can deduct the fair market value from your taxable income if the investment was held for more than one year. Plus, the receiving charity doesn’t have to pay taxes when it sells the stock or mutual fund.
7. Contribute to a 529 Plan
This holiday season, why not give the gift that keeps on giving? Contributions to a 529 plan will grow tax-free and can help your child or grandchild pay for qualified education expenses. As an added bonus, some states offer additional tax benefits for contributions made in the same calendar year. Remember, gifts exceeding $14,000 per person will be subject to a gift tax.
8. Take Advantage of the IRS Saver’s Credit
If you contribute to a qualifying retirement account you may be eligible to claim the Saver’s Credit – a tax credit worth up to 50% of contributions to a retirement plan or IRA. Individuals can receive up to $2,000 in tax credits, while the limit is $4,000 for families.
9. Take Required Minimum Distributions (RMDs)
If you are retired and turned 70½ this year, you are required to take your first RMD from IRAs or retirement accounts such as 401(k)s by April 1, 2018. Your second RMD must be taken by December 31, 2018. Those who wish to avoid having both withdrawals included on their 2018 tax return should make their first withdrawal by December 31 this year.
PLEASE NOTE: At the writing of this blog, possible Federal Tax legislation is under consideration. The information contained in the article is believed to be accurate under current law.
Mark A. Vergenes is President of MIRUS Financial Partners, 110 E. King St., Lancaster. He is an Investment Advisor Representative offering securities and advisory services offered through Cetera Advisor Networks LLC member FINRA/SIPC. Cetera is not affiliated with any other named entity. Niether MIRUS Financial Partners nor Cetera Advisor Networks LLC. give tax or legal advice.