When it comes to money, many Americans have elevated procrastination to an art form. What is it about planning, budgeting and saving that causes many of us to curl up in the fetal position? Overwhelming? Absolutely! Daunting? Certainly! Doable and possible? Of course!
And if you start now you can boost your savings, reduce your taxes and virtually eliminate your holiday stress in December.
Review Your Investments: Don’t forget your mutual fund year-end capital gains projections when estimating 2018 taxes. Taxpayers with lower incomes during retirement may qualify for zero percent long-term capital gains. Sell positions with losses during this quarter to claim tax benefits this tax year. If capital losses exceed capital gains, you may use up to an additional $3,000 to reduce taxable income — carry over the excess amount to next year.
Charitable Gifts: Your contributions to charities must arrive by the end of the calendar year; appreciated stock gifts and donor-advised funds have earlier deadlines. Itemized gifts must exceed the new higher standard deductions to remain deductible. Consider doubling up gifts to your favorite charities this year. For those of you age 70 1/2, consider the qualified charitable distribution, or QCD, that allows direct gifting from your IRA directly to a charity. It may satisfy some or all of your required minimum distribution, or RMD.
Retirement Plan Accounts: You can defer up to $18,500, and avoid some taxation, in your employer-sponsored plan. People 50 and older can defer up to $24,500 by the year-end deadline. Many companies have reinstated or increased the employer matching contribution, so grab that extra benefit! You can accrue more long-term tax advantages using the Roth 401(k) option, if your company offers it. If your company lacks a plan, stop making excuses and set up an individual plan with your adviser.
Education Savings: Contributions to education savings accounts and 529 plans grow tax deferred. Some states, including Idaho, allow a tax deduction for contributions. You can use up to $10,000 per year, per beneficiary to pay tuition for K-12 students. Check with your tax professional if you have UTMA/UGMA custodian accounts to avoid the new “kiddie tax.”
You have about 10 weeks to go before year’s end, so it’s time to get moving! The human gift of free will is both a blessing and a curse, but as my planning partners remind me, we have to try. And if you don’t, who will?
Mark Daly is an investment management analyst and partner in the Perpetua Group. Mark@ThePerpetuaGroup.com.