When it comes to December, we can all learn a lesson regarding our finances from, none other than Santa himself!! Just like Santa, we all need to “make a list and check it twice” regarding all the outstanding items that HAVE to be done by the end of the year.
Remember, even though taxes are due in April, they are considered for the calendar year (ending in December). Therefore, any mechanism that can help ease your tax burden should be done BEFORE the calendar changes.
What are some things you should consider before the year’s end?
- Tax loss harvesting should be done by December 31st. All losses need to have occurred within the calendar year.
- Charitable Contributions that are applicable to 2018 MUST be made by the end of the year.
- 529 Contributions need to be made by December 31st to be applicable to this year’s taxes
- Avoid buying a mutual fund in December that anticipates paying a capital gains distribution. This can cause a taxable event.
- If you are 70 ½ or older, do not forget to take your required minimum distribution (RMD) based on ALL of your retirement accounts – or else you could be hit with a 50% tax penalty on the amount of the distribution that you should have taken.
- Employee Benefits:
- Make sure that all elections are made that may affect the 2019 tax year
- If your FSA Dependent Care Account is a “use it or lose it” account, ensure that the funds are used by the end of the year.
- FOR BUSINESSES:
- Qualified Retirement Plans need to be ESTABLISHED by December 31st in order to reap any tax advantages. (They can be funded later, but they need to be established by year’s end)
- Equipment purchases made within the year (up to $1 million) can be used as a deductible expense & does not need to be depreciated
Avoid being on the NAUGHTY list by neglecting to take advantage of these tax incentives for 2018.
Make your list NOW and check it twice BEFORE the end of the year!