The end of the year is a perfect time to get your financial house in order. You can find ways to save on taxes, discuss money issues with your family and make plans for 2018.
How to begin? We generally recommend these simple tips:
1. Look for ways to reduce your 2018 income taxes.
Take action before the end of the year to save on taxes. You could consider:
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
- Contributing the maximum amount to all of your retirement plan programs. Why? The government gives you a tax deduction for making contributions to certain qualified retirement plan programs — meaning those funded with pretax dollars, such as your 401(k), 401(b) and traditional IRAs (excluding contributions to a Roth IRA). No matter what tax bracket you’re in, your money can grow there without being taxed until you pull it out.
- Tax bracket management. Is there a gap between the bracket you’re in right now (your amount of taxable income) and the next tax bracket? You may be able to use that gap to your advantage, perhaps by selling and realizing a capital gain, or by converting money in a traditional IRA to a Roth IRA. We suggest talking to a financial professional about this valuable opportunity.
- Timing and/or bunching deductions. If you think your income may change in 2018, go over your deductions and see if you can move them into whichever year will do you the most good. You may also be able to bunch certain expenses into one year, which could push you over a threshold that gives you a tax deduction you wouldn't have gotten otherwise.
- Dumping losing stocks. Taking losses can help with your taxes.
2. Take required minimum distributions.
If you are age 70½ or older and don’t take the required minimum distributions on IRAs, you’ll be penalized. It’s no small matter — the penalty is 50% of what you should have withdrawn, and then that amount is taxed. For all people except those of whom are due for their first RMD (who can wait until the following April), you need to take care of it by the Dec. 31 deadline.
3. Give.
Donating to charities can reduce your tax bill. Besides giving to charities, you can also currently give $14,000 to as many individuals as you'd like without incurring a gift tax or affecting the unified credit. A husband and wife can each currently make $14,000 gifts. In 2018, the gift tax exclusion amount goes up to $15,000.
4. Talk with your family.
If you have the good fortune to have your family gathered in one place during the holidays, take a little time to talk about the finances that concern them (wills, trusts, planned giving, etc.). A little discussion now can make a big difference later.
5. Prioritize planning.
We believe there's no better time for setting goals than the end of the year. Try looking just three years ahead: What would have to happen in order for you to view it as a successful period?
6. Retire your debt.
I believe that if you are retired, so should your debt be retired. Instead of adding to your debt during the holidays, see if you can pay it off entirely. Wouldn’t it feel great to begin 2018 debt-free?
-
Baby Boomers vs Gen X: Who Spends More?Baby Boomers and Gen X are guilty of spending a lot of money. Here's a look at where their money goes.
-
Retire in Finland and Live the Nordic DreamHere's how to retire in Finland as a US retiree. It's ideal for those who value natural beauty, low crime and good healthcare.
-
You're Close to Retirement and Cashed Out: How Do You Get Back In?If you've been scared into an all-cash position, it's wise to consider reinvesting your money in the markets. Here's how a financial planner recommends you can get back in the saddle.
-
After the Disaster: An Expert's Guide to Deciding Whether to Rebuild or RelocateHomeowners hit by disaster must weigh the emotional desire to rebuild against the financial realities of insurance coverage, unexpected costs and future risk.
-
A Financial Expert's Tips for Lending Money to Family and FriendsWhat starts as a lifeline can turn into a minefield if the borrower ghosts the lender. Following these three steps can help you avoid family feuds over funds.
-
What the HECM? Combine It With a QLAC and See What HappensCombining a reverse mortgage known as a HECM with a QLAC (qualifying longevity annuity contract) can provide longevity protection, tax savings and liquidity for unplanned expenses.
-
721 UPREIT DSTs: Real Estate Investing Expert Explores the Hidden RisksPotential investors need to understand the crucial distinction between a REIT's option to buy a Delaware statutory trust's property and its obligation.
-
I'm an Insurance Expert: Yes, You Need Life Insurance Even if the Kids Are Grown and the House Is Paid OffLife insurance isn't about you. It's about providing for loved ones and covering expenses after you're gone. Here are five key reasons to have it.
-
My Professional Advice: When It Comes to Money, You Do YouThis is how embracing the 'letting others be' and 'learning to surrender' mindsets can improve your relationship with money.
-
Direct Indexing Expert Explains How It Can Be a Smarter Way to InvestDirect indexing provides a more efficient approach to investing that can boost after-tax returns, but is it right for you?
