12 things to do before you ring in the New Year

By Kevin Theissen
Skygate Financial Group LLC

12. Leverage your Health Plan Deductible

Have you hit your health plan deductible for the year? Then now might be the best time to consider getting to the doctor to check out that mole, rather than waiting for the new year.

11. Don’t Forget Your IRA
Your traditional IRA contributions may be tax-deductible. However, that deduction may be limited if you or your spouse are covered by a retirement plan at work and your income exceeds certain levels. *1 Withdrawals from traditional IRAs are taxed as ordinary income and, if taken before age 59½, may be subject to a 10% federal income tax penalty. Generally, once you reach age 70½, you must begin taking required minimum distributions.

10. Use Up Your Flexible Spending Account
FSAs allow you to put pre-tax money away for medical expenses, but you may only be allowed to carry over up to $500 to the new year. *2 Spending these funds before the year’s end allows you to take full advantage of the account.

9. Contribute to Charity
Giving to charity around the holidays is always a good idea, both for your spirit and your tax bill, but pay attention to the date of delivery. *3 In order for the giving to count toward the current year’s taxes, the charity has to receive the gift by the year’s end. *4

8. Defer Taking Yearend Bonuses or Salary
If your employer has the flexibility, or you’re a freelancer, you might consider deferring income or a bonus to next year. This really only makes sense if you anticipate being in a lower tax bracket next year. (No use pushing next year’s income into a higher tax bracket.) This could help manage your tax burden for the current tax year. *5

7. Harvest Capital Losses
This simply means selling at a loss investments that no longer fit your portfolio, which may offset capital gains in other areas. Be careful, though. You can’t buy those stocks back for 30 days and still take the loss. *6

6. Take Advantage of Your Annual Gift Tax Exclusion
You can gift up to $14,000 a year per person. You get a new gift exclusion every year, so consider your choices. *7

5.  If You Are of Age, Take Required Minimum Distributions
At age 70 ½, you’re required to start taking withdrawals from certain tax-deferred retirement accounts, so don’t miss it. *8

4. Put Off Joining the Gym
It’s a good time of year to start planning for your New Year’s resolution, and getting fit is always a great goal. Wait until January, though, for the actual signup. Gym prices may be better.

3. Plan Your Itemized Deductions
Some expenses can only be deducted on your taxes if they meet a certain percentage of your adjusted gross income –AGI. You can meet these AGI floors by bunching these expenses together. For example, medical expenses may be required to meet a 10 percent AGI floor to be deducted. If you have not hit that floor, you might consider moving that costly procedure you have planned for next year forward into this year. The information in this material is not intended as tax advice. Please consult tax professionals for specific information regarding your individual situation.

2. Get Organized for Tax Season
Gather all the documents, records, receipts, and anything else you might need come tax time.

1. Get a Checkup
Schedule a meeting with your financial professional to review your overall investments and the health of your portfolio, and to discuss your strategy for the following year.

*1 IRS.gov, 2015
*2 Healthcare.gov, 2015. If available, you can put up to $2,550 into Flexible Spending Accounts each year. Generally, you must use that money within the plan year, however your employer can provide a grace period of up to 2½ months to use the money in your account. Your employer also can allow you to carry over up to $500 to the following year.
*3 The Internal Revenue Service has specific rules and guidelines for charitable contributions. Before taking any specific action, be sure to consult with your tax professional.
*4 Marketwatch.com, Dec. 14, 2014
*5 The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult tax professionals for specific information regarding your individual situation. Generally, you can deduct net capital losses of up to $3,000 from your taxable income each year. If you have more than $3,000 in losses in a given year, you may be able to carry forward the remaining loss balance to subsequent years.
*7 The Internal Revenue Service has specific rules and guidelines for the annual gift tax exclusion. Before taking any specific action, be sure to consult with your tax professional.
*8 Penalties may occur for missed RMDs. Most are required to begin by Dec. 31 of the year following the date of death. Any RMDs due for the original owner must be taken by their deadlines to avoid penalties. You will pay taxes on any distributions you take.