(Yep, it’s almost here).
With only a few weeks left in 2017, it’ll soon be time to hang stockings, light Menorahs, and figure out your party plans and resolutions for New Year’s Eve. However, if you want to try to reduce your tax liability or improve your bottom line for 2018, time is running out. Here’s how to prep your money for year-end with these six money tips to help you close out the year and ring in the new.
Never Too Early for New Year’s Resolutions
Let’s face it: We all start the year with the greatest of intentions but often fall off track quickly. That’s why gyms get crowded in early January but become ghost towns by February. Don’t get caught in the same cycle when it comes to your money. With a little bit of planning, you can stay on track to meet your money goals.
And as we start a new year, what better time to make sure you’re on track for money success than by getting your financial house in order?
How to Prep Your Money for Year-End: Six Money Tips
1. Time to Play Catch Up for Retirement
As the shot clock winds down, now’s the time to play catch up. Retirement contributions must be in place by December 31, 2017 for your company-sponsored plans. And if you’re self-employed, a contractor, or have a side business, consider setting up and funding a defined benefit pension plan. Solo plans are a great way to redirect money to retirement and reduce your current year tax liability.
2. Give like you mean it
It feels good to give as I highlighted in a recent post. Additionally, it carries potential tax benefits. Remember many important tax deductions such as charitable giving also end at midnight on December 31. Now is the time to complete both cash and non-cash contributions to the charities of your choice. Ensure that each charity you support is recognized by the IRS by using this handy tool from the IRS (EO Select Check). And keep receipts for all cash and non-cash contributions such as household items, clothing, and office equipment. Be sure the receipt includes the charity’s address and federal tax ID. Your tax guy will be happy with you, too, if you keep good records. Before you donate, use these tips I outlined here in a previous post.
3.) When to take income and when to wait
Looking into various ways to accelerate or defer income or deductions is something to consider. With the help of a good tax planner, you may find legitimate ways to defer or shift your income into lower tax brackets. Business owners may find it makes sense to prepay next year’s expenses now or delay invoices until the beginning of 2018. Employed individuals may want to ask employers to delay 2017 end-of-year bonuses. If you are self-employed or operate rental property, don’t forget to consider reporting the allowance money you paid to your minor children who helped you out in your business or did chores around the property. And with likely changes impacting itemized deductions next year, you’d be better off accelerating payment of personal or real property taxes into 2017.
4.) Your portfolio
As year-end approaches, take time to analyze your portfolio. Is it time to rebalance allocations? As part of that process, you may find underperforming stocks that you’d like to sell. It’s possible to reap tax benefits by disposing of those stocks and use the losses to offset capital gains you may have realized during the year. Consider speaking with a tax professional for guidance.
5.) Look back and assess
It’s easy to lose track of your spending in the past year. So, take the time now to see where your money actually went. This will help you figure out how much you may need for the holidays, and also give you some insight so you can fine tune your spending for 2018. If you’re technically inclined, consider using an online tracking tool from your bank or from sites like Quicken or Mint.
6.) Don’t forget non-financial goals
Forget finances for a minute — what do you want to accomplish in terms of personal ambitions in 2018? This is where those New Year’s Resolutions kick back in. Maybe it’s the year to start a new job or a side business, or take a special vacation you’ve always dreamed of. Maybe you want to spend more time with family, or in the gym. Whatever it is, now is a good time to consider changing things up. Remember that building wealth is more than amassing money.
The end of the year always comes faster than we think. Go ahead and get started now while there’s a little time left. The effort you put in can help you roll into the holiday season with a little less worry, and a little more cheer.
If you’d like an objective second opinion about your finances and are looking for a road map on how to live better by planning well, please reach out to Steve Stanganelli, CFP®, CRPC®, AEP® at Clear View Wealth Advisors, LLC. Email him at Steve@ClearViewWealthAdvisors.com.