Five Financial To Do's Before Year's End

The following information was provided by the finance professionals at Bloomfield Hills Financial.

Charitable Donations

If you itemize deductions on your income tax, you may want to make a charitable donation to your favorite organization before the year's end. Not only will this contribution make you feel good, but you can use this donation to reduce your overall taxable income, thereby lowering your tax bill.

Max Out Retirement Plan Contributions

You only have until December 31^st to contribute the maximum ($16,500 – under age 50; $22K – ages 50 and older) to your 401k and 403b plans. Take a moment to find out how much money you have contributed to your plan for the year. Some employers will give you the option to contribute up to 100 percent of your last few paychecks as a way to fatten up your contributions for the year, so be sure to check with the human resources department.

Tax Loss Harvesting

Take a look at your investments to see if there is a way to create a realized loss in your portfolio. With a realized loss, you can either use this to help offset any reportable gains, or you can use up to $3K of your loss to write off against your income. Check with your advisor or tax professional for additional details.

Use Your Healthcare/Flexible Spending Accounts

If you have such a plan through your employer, you probably have been setting aside part of your salary on pre-tax basis for certain purposes, such as healthcare expenses. Keep in mind that these plans follow the “use it or lose it” rule, so don’t miss out! Check the balance of your account and be sure to spend what you have coming by the year's end.

Consider Gifting

If you have a sizable estate, you may want to consider making a tax-free gift to your heirs (up to $13K this year). This way, by gifting money to your heirs over time, you will gradually reduce the amount of “inherited” assets, which would be subject to estate taxes upon your death.