By Claudia Buck
Amid the hectic holiday season, who but Scrooge wants to dwell on taxes, stock losses, IRAs and 401(k)s? But it might pay off to take a few moments, given that some financial deadlines are fast approaching. Here are 10 year-end smart money moves:
(1) Use up your FSA: If you’re one of the estimated 14 million Americans with a Flexible Savings Account through their employer, now’s the time to spend any money sitting in your account. Because it’s use-it-or-lose-it, the tax-free money you’ve put in there to cover health care or dependent care costs will disappear if you don’t spend it by Dec. 31. (Some employers offer an extended grace period — until March 15 — to use up the money.)
(2) Donate, donate, donate: Make donations to your favorite causes and charities. If it’s a cash donation, you’ll need a bank record (canceled check, credit card statement, etc.) or a written receipt from the charitable group. Any donation above $250 always requires a written record from the charity. If you’re donating “gently used” clothing, furniture and other household items, keep a list of each item’s estimated value.
(3) Watch IRAs and 401(k)s: With your IRAs and 401(k)s, there are several deadlines to note. For IRAs, if you’re older than 70½, you’ve got until Dec. 31 to take your annual mandatory distribution. If you miss the Dec. 31 deadline, the penalty is 50 percent of the amount you did not withdraw. For 401(k)s, don’t forget to maximize your annual contribution, especially if your employer offers a matching contribution.
(4) Dump the losers: This year, with a booming stock market, many investors could be seeing sizable gains in their stock portfolio and in year-end mutual fund distributions. Find potential losers that could be sold to offset the 15 percent capital gains tax.
(5) Taxes for same-sex couples: Same-sex couples should take note of several tax changes — and possible tax refunds.
(6) Get covered: If you’ve never had health care or couldn’t get affordable coverage in the past, now’s the time to sign up under the federal Affordable Care Act. Technically, consumers have until March 31 to enroll in the mandatory coverage, but the earlier the better.
(7) Year-end gifting? In years past, many higher-income families gifted up to the maximum — $10,000 — to their adult children and grandchildren in an effort to keep their taxable income below the $1 million-per-person threshold that triggers the federal estate tax. But that’s no longer necessary, thanks to federal tax code changes that went into effect in 2013. Those changes raised the estate tax to 40 percent, but also raised the estate tax exemption to $5.25 million per person, meaning a married couple could leave $10.5 million in assets that wouldn’t be subject to federal taxes.
(8) Home for the holidays: If you’ve got college-age kids home for the holidays, be sure they’ve filled out an advance health-care directive.
(9) Check beneficiaries: If you’ve had a major lifestyle change — divorce, wedding, children — it’s a good time to check beneficiaries on your various accounts: IRAs, 401(k), life insurance, annuities, etc. It’s not uncommon to forget about changing the beneficiary paperwork after getting married or divorced.
(10) Take heart: With the new year just around the corner, take a moment to reflect. If you need a financial boost, think about a session with a nonprofit credit counselor. If you haven’t updated your estate plan or will/trust, see your attorney. Maybe you want to figure out your retirement finances with a certified financial planner.