Another year is drawing to a close, and you know what that means—it’s time for a final review of your 2017 finances. With tax reform pending, this year’s planning may be more important than ever. So take time sooner rather than later to make adjustments to help you save on your 2017 taxes. It’s also a great opportunity to make sure you start 2018 right. Here’s a year-end list to help you with your financial review.
Take care of retirement.
Review your 401(k) or 403(b) contributions and investment allocations to help ensure you’re on track to meet your retirement goals.
Fund your IRA or SEP IRA as early as possible. The deadline to contribute for this tax year is April 17, 2018. But the sooner you make your contribution, the sooner it can start working for you.
If you are older than 70½, you have until December 31 to take the required minimum distribution (RMD) from your retirement accounts. If not, you could face a penalty of 50% of your RMD amount. If you turned 70½ this year, you have until April 1, 2018.
Review your investments.
Expecting capital gains taxes this year? Review your portfolio and consider selling off poor performers to help offset those taxes.
Planning a generous gift to a favorite charity? Consider donating long-term appreciated securities directly to the charity instead of cash. You’ll get a bigger tax break, and your favorite charity will get a bigger gift.
If your desired charity can’t process securities gifts or if you want to split your securities among multiple charities, a donor-advised fund can help. Make one contribution to a DAF and then grant to as many charities as you want with the proceeds
Plan for higher education.
Consider opening or contributing to a 529 (college savings) plan. Your money will be invested and grow federally tax-free. In more than 30 U.S. states, you may also get a full or partial state tax deduction or credit for your plan contributions.
Giving year-end gifts.
To family and friends. You can give up to $14,000 to as many individuals as you like in a calendar year without paying gift taxes. If you are married, you and your spouse can each give $14,000 to the same individual ($28,000 total) without being subject to gift taxes.
To charity. For simple gifts made by check, you have until December 31 to make your gift. Note checks must be USPS postmarked by December 31st. It will count for the 2017 tax year no matter when the charity cashes the check.
Had a good year and would benefit from a larger charitable tax deduction? Not sure what charities to support? Consider a donor-advised fund like the Giving Fund from TIAA Charitable. Your money is invested tax-free. And you can donate from it whenever you like. Check the year-end deadlines for opening and contributing.
Be strategic about taxes.
Factor in tax reform. It could affect future tax rates and reduce incentives to itemize. Given those changes—and your financial situation—you may want to consider additional ways to make the most of your charitable tax deductions this year when tax rates might be higher and you may be more likely to itemize your deductions. You may also want to check with your financial advisor in plenty of time to act on any year-end related decisions.
Tax reform aside, you may have reasons causing you to want to accelerate deductions—such as quarterly state tax payments, and defer income until next year. However, if you think you might be subject to the alternative minimum tax (AMT), talk with your accountant or financial advisor first.
Check your withholdings and make any necessary adjustments for next year. After all, no one wants to get hit with a large tax bill in April. You also don’t want an overly large refund either—why let your money work for Uncle Sam when it could be working for you?
Start gathering your year-end receipts and other tax documents now. If you’re missing something, it’s better to figure that out now so you’re not scrambling next April. If you have a donor-advised fund your job will be much easier. All contributions and recommendations for charitable grants will be summarized in one place.
The number one thing to remember?
The clock is ticking! So, pay attention to year-end deadlines to make sure your contributions qualify for the tax year that ends December 31.