Before you go into holiday mode, set a aside an hour to check in with your financial accounts to see if you could benefit from any of these simple financial moves before year end.
Give strategically. You can minimize your 2015 tax burden by being mindful of how you make charitable donations–but you must act before year end. If you want to donate money to charity, consider gifting stocks. Those you’ve owned for at least a year that have appreciated will be recognized at fair market value when you gift them to charity, but neither you or the non-profit you will be on the hook for capital gains taxes associated with the stock’s appreciation and sale.
If you’re ready to throw in the towel on stocks that have lost value in 2015, you can also benefit by selling them, and donating the proceeds of the sale to charity before year end. When you file your 2015 taxes, you can claim both the capital loss, and the charitable contribution.
Before you choose a charity to gift your stock, check IRS.gov to confirm the organization is officially considered a public charity. (Otherwise, you won’t get the tax benefits of gifting appreciated stock).
Revisit asset allocations. The markets turned more volatile in 2015 than they have in previous years. While ups and downs in the market are never an indicator that you should panic and sell, they do signal the need to revisit asset allocations to ensure you’re still invested in the right products to help you reach your long-term investment goals, and manage risk. If you determine you need to sell some assets, doing so before year end can work to your advantage when you file taxes–but only if you sell strategically.
- Focus on assets you’ve held the longest. Investments that you’ve owned for one year or longer usually mean lower capital gains tax rates. Start there–even if selling means losing money. You may be able to carry losses from stock sales forward into a future tax year, if you exceed the capital gains loss you can claim for the 2015 tax year.
Get your financial house in order. Time off work during the holidays is an opportunity to catch up on the financial tasks that often get pushed to the back burner.
- If you still have 401(k) accounts from previous employers, move the funds into a rollover IRA with a financial institution you can easily access.
- Check in with your workplace retirement contributions to confirm that you’ve come as close as possible to your $18,000 contribution limit for the 2015 tax year. Don’t think you can afford to contribute? Failing to maximize your retirement contributions can cost you more than you realize. Maxing out your pretax retirement contributions at $18,000 could amount to saving more than $6,000 in federal and state income taxes each year.
- If you have a ROTH IRA or traditional IRA account, you may be eligible to contribute to one or both of those accounts as well, based on your adjusted gross income (AGI).