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Year End Tax CheckList

    As the year comes to a close, it’s time to review and reflect upon the past year. All of your triumphs and falls, as well as good times had with family and friends. Mark things off of your checklist as you set new goals for the upcoming year. Finally, you can kick back, relax, and enjoy the holiday season right?


    Almost, but there are still things to address before year end. I’m not talking about gift shopping or venturing out to see the in-laws. I’m referring the checklist for your financial well being. Check out these tips to help you enter into the new year with piece of mind.


Maximize Your Tax Deductions

    In a past post, I talked about tax deductions and their effect on an individual’s tax bracket. You can read the full article here. While that article dove into how deductions can help and how they better are used, as well as strategies to bring a person’s tax bracket down. Here we will cover other deductions that may be available to you.


    1. 401k – The tax break is dollar for dollar of what is put in. While the max contribution per year is 18k, most of the time that is hard to capitalize on. You should at least contribute enough to take advantage of the full employer match. The end of the year is a great time for adding those last minute dollars toward your retirement as well as receiving the current tax benefits.


    2. Sell Securities- Wither you have gains or losses, now is the time to optimize your portfolio. While a capital gain is taxed, a loss can be written off to offset the gains. Even if you have no gains, a capital loss can be written off on your taxes up to 3k a year.


    3. Charitable Contributions- These are another great way to lower your taxable income as well as the added bonus of helping others. Charitable contributions may only be written off if you file a 1040 and itemize deductions on Schedule A. Consult a tax professional to find out if you are able to.


    Charitable contributions come in all forms ranging from cash, property, goods, stock/ securities, and more. You can donate up to 50% of your adjusted gross income for cash or 20% from securities. Any donation of appreciated securities avoid having to pay capital gains tax on. Just remember, donations must be to a qualified charity.


    4. Further Education -No matter what age or stage on life you are in, there is a tax credit for pursuing further education. You may choose either the Lifetime Learning Credit or the American Opportunity Credit.


Lifetime Learning Credit- You can claim up to 2k once a year for any school related expenses. This credit may only be taken once a year.

American Opportunity Credit- You can claim up to 2.5k with this credit, but may only be taken upon the first four years of higher education.


    5. 529 Plan- A 529 plan is like an investment account for college. It is wise to start while a child is young so the money has time to grow while giving the contributors tax benefits now. Once the beneficiary is able to draw from the account, it may be used for most scholarly expenses. It is possible to contribute 14k without triggering any gift tax. However, that is 14k for the beneficiary. Anyone can contribute to to the account so make sure to know the limits to avoid gift tax. Since this is run by an individual state, first check your specific state’s rules and regulations.


    6. HSA- Or Health Savings Account are for individuals with high deductible health plans. Contributions made to an HSA will reduce taxable income. Withdrawals are also tax free as long as they are for qualified medical or healthcare expenses. The max per year you can contribute is $3,400 in 2017 for an individual and $6,800 for a family. If money is unused in this account, it will continue to roll over to the new year unlike flexible savings accounts.


Maximize Roth IRA

    The max contribution you can make into a Roth IRA is $5,500 per year. Since you are taxed before the money goes in and not when the money gets taken out, it’s best to cap it out and maximize contributions every year so it has more time to grow and build upon itself tax free.


Use up the Flexible Spending Account

    A Flexible spending account is great for those who know how to use it and make the most of it. This is a special account an employer may offer for out of pocket healthcare expenses. You don’t need to pay taxes on this money. However, it is only good for one year. Once the year ends, you lose any money that is in this account. So make sure to schedule all of your appointments to use it up beforehand. Some employers may offer a grace period to use this money, so double check with them to verify you can use it in time.


Let me know if I missed anything or you want me to add/ elaborate on more. Don’t forget to sign up for the newsletter to receive new and updated tips.


    1. Hope it’s helpful. The less we have to pay in taxes or the more we can save means there is more capital to put into our portfolios.

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