Insights: Article

Eide Like To Know How To Prepare As Year-End Approaches

By   Leonard Sweet

December 12, 2017

If you’re like many, the last months of the year may have you thinking of colder weather, holiday traditions, and spending time with family and friends. But year-end is also a good time to take a look at your finances and implement some strategies that may help you to be better positioned financially for 2018, and beyond.

Maximize Retirement Account Contributions
One of the easiest ways to potentially reduce taxes, while helping to build wealth over time, is by maximizing contributions to your employer-sponsored qualified retirement plan. For 2017, participants can contribute up to $18,000 to their plan, and those age 50 or older are eligible for additional catch-up contributions of $6,000, for a maximum contribution of $24,000. For those with Individual Retirement Accounts (IRA), contributions of up to $5,500 may be made for 2017 with additional catch-up contributions of $1,000 for those 50 or older.

Benefit from an HSA
For those who participate in high deductible health care plans, a Health Savings Account (HSA) can help you save for out-of-pocket health expenses in a tax-advantaged way. For 2018, HSA participants can make pre-tax contributions of up to $3,450 for individuals, and $6,900 for families. Those age 55 or older can contribute an additional $1,000. When participating in an HSA, your contributions help reduce your current taxable income, and earnings on the contributions grow tax-free over time. Withdrawals may be made tax-free, as well, provided they are used to pay for qualifying medical expenses. Lastly, there is no timeframe in which HSA contributions must be used; contributions can continue to accumulate in the accounts to cover medical expenses that may be incurred in the future.

Let Long-Term Capital Gain Rates Work for You
When selling securities in a taxable account, consider the securities you’ve held for a year or more. While the gains on securities held for less than a year are taxed at ordinary income tax rates, the gains on securities held for at least one year may benefit from more favorable long-term capital gains tax treatment, thereby reducing the amount of tax that may be owed on the gain.

Consider Charitable Giving
Donating to a favorite charity before year end may also help to shrink your tax bill in 2017 while supporting a cause or organization that may be important to you. While many think of charitable giving in terms of monetary donations, a donation of low basis stock may help lower your current tax obligation. Be sure the group you are supporting is considered a qualified organization by the IRS in order to benefit from a tax deduction.

While year-end can be a busy time for many, we believe it’s important to pause and consider what you may need to do from a financial perspective, so that you are set up for success in the new year, and in all the years that follow.