3 Things to Do Before December 31

Financial tips

3 Things to Do Before December 31

Posted by RDW Financial Group
2 years ago | December 7, 2017

If you’re like most people, December can feel a bit hectic. Tax planning is probably the last thing you want to consider right now, but there are a few very important reasons that you should. Hindsight is often 20/20, and this rule applies to your federal income taxes as well!

Since your tax bill can sometimes surprise you in the spring, taking a few moments to maximize potential deductions and credits can ward off disappointment. However, many actions must be taken during the calendar year if you want to count them as a tax write-off, so take a moment to evaluate these items before December 31.

Make your charitable contributions. This is the time of year many people consider giving to a charity or two, but you must follow IRS guidelines carefully if you want to claim the charitable contributions deduction later. First, research your chosen charity carefully to ensure that it is qualified by the IRS. Contributions to non-qualified charities cannot be claimed as a tax deduction.

Then, make sure to value your donation correctly, keep a receipt as proof, and work closely with your tax professional to ensure that you’re claiming the deduction correctly. Most importantly, you must make your charitable contributions by December 31.

Max out your retirement plan contributions. This year, you can contribute up to $18,000 to your qualified retirement plan (401k) on a pre-tax basis. Not only will you bet better prepared for retirement; you can significantly reduce your income tax liability as well. If you’ve reached age 50, you can also make additional “catch up” contributions of $6,000 per year, for a total of $24,000 in 2017. Check to be sure you’ve reached the maximum contribution for the year. Consider devoting a holiday bonus or some other extra cash to your retirement fund, if possible.

Research other tax credits and deductions. This year, the IRS raised standard deductions for both singles and couples, but for many people it is still better to itemize returns. Pause for a moment and research tax deductions and credits that might be available to you, so that you can take the appropriate action before the end of the year.

As always, give us a call if you have questions about your retirement plan. We can help you identify ways to plan appropriately for retirement, while potentially earning a break on your income taxes at the same time.

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