At year-end, how do we keep from falling on our rear ends, financially speaking?
One way is by adopting a strategy for tax and savings and putting it in place in 2015’s remaining weeks. If you haven’t considered end-of-year steps to take to help you close out 2015 and begin 2016 on high notes, let’s look at a six worthy of consideration.
1. Meet with your accountant or financial planner to review the year and look ahead to 2016.
Many people have already done this, but a surprising number haven’t. A year-end review and year-ahead look with your accountant can reveal to you vital information about your money, how you’re using it, and how it might be better used, personally or in your business.
You may be a savvy investor, an effective bookkeeper, or a superior saver. Nevertheless, the laws, regulations, rules – and therefore, opportunities – constantly change. Accountants or financial advisers at their best are counselors. You don’t have to take their advice, but what they know - that you don’t know - can help you.
2. Put the maximum into your retirement contributions
This is often hard, because our needs compete with our wants. The need to save for retirement is absolute. Social Security does not exist to provide comfortable, care-free retirements. End-of-year is a good time to check what your future Social Security payments will be, depending on your age in the year you choose to retire. The earlier you retire, the less you’ll receive.
That’s the principal reason for putting the maximum amount into retirement savings, particularly tax-advantageous financial instruments. For example, in 2015 contributions of up to $5,500 can be made to a traditional IRA. If you’re over 50, you can add a $1,000 “catch-up” contribution (to help you “catch-up” with the retirement savings you’ll need). The IRS has a website that details retirement plan contribution limits. You can see the entire page at here.
3. Two considerations for small businesses:
Small business owners who have their children on the payroll should consider Roth IRA contributions. These contributions are particularly advantageous as they grow tax-free.
Machinery and equipment purchases may be 100 percent deductible (depending on the fate of the extender bill in Congress). If this bill is not extended, there are still potential savings under IRS Section 179D.
4. Make charitable contributions, or a one-time gift, for tax deductions or to benefit gift recipients.
Charitable contributions to qualifying organizations are tax-deductible. Charitable contributions have two benefits: helping people while serving as a component of your tax strategy.
The government permits individual monetary gifts in 2015 of up to $14,000 tax-free, with no reporting requirements, to family members or friends.
5. Pre-payments can reduce your tax exposure.
Making advance payments of estimated state and federal taxes, medical bill payments, property tax payments, and even extra mortgage payments, are tax deductions that can be achieved for tax year 2015. To the degree your taxable income is reduced, so are your taxes.
6. Assess and analyze your spending in 2015, and project and budget for 2016.
Review carefully how much money you spent in 2015, and on what. Put it into spending categories. This will reveal in what categories you perhaps spent too much, too little, and to see how in 2016 your money might be better allocated, invested, or saved. It’s the equivalent of a spending GPS, a look-back guide to help you find the way forward.
End-of-year is a financial opportunity, and opportunity is knocking.
You may view the original article from the Knoxville News Sentinel here.