8 Tips for Year-End Financial Planning

As the year winds down, the cool winds begin to blow, and (hopefully) the rain and snow descend upon us, it’s time to double check your financial and tax planning to make any year-end moves to help reduce your taxes, avoid pitfalls, and position yourself for the year to come. Below are eight ways that may help reduce your tax bill, improve your portfolio returns, and save you money.

  1. Tax loss harvesting. This bit of advice typically shows up on financial advice lists at the end of each year, but it’s probably been since 2008 that many folks have had any significant losses to address. This year is likely to be different, so consider selling any losers, but be wary of the wash sale rule if you still like the company.
  2. Pay certain 2016 bills, such as property taxes, by year end. This will bring forward deductions on items you need to pay early next year anyway.
  3. Maximize plan contributions, including your IRA, SEP, or 401K/403B if you still have time.
  4. Make charitable donations. This can be a tricky one, as some organizations do not qualify and the amount that can be deducted can vary significantly. However, it can be a great tool if you are feeling especially philanthropic, as you can typically deduct a large portion of your income.
  5. Business owners — consider making large purchases, such as an automobile, copier, computer, or machinery before year end to take advantage of Section 179 deduction. This allows a business to expense a sizable portion of certain capital expenditures instead of depreciating the full amount over time.
  6. Don’t forget to take your Required Minimum Distribution if you are over age 70 ½. The penalty for failing to take your RMD is the biggest tax penalty the IRS levies — 50 percent of the required amount that was not taken. RMDs can be tricky and it’s important to have a strategy on how to deal with them. There are also ways to reduce the amount of your RMDs, such as converting a Traditional IRA or a 401K to a ROTH IRA, or putting some of your funds into certain annuities, such as a QLAC (Qualified Lifetime Annuity Contract). If you are uncertain about any aspect of an RMD, be sure to talk to an expert to avoid getting burned.
  7. Use up your Flexible Spending Account funds. The rules have changed in recent years and you may now have until March 15th to use the funds in your Health Care or Dependent Care FSA, or you may be able to carry up to $500 over to the following year, but they are still “Use it or lose it” accounts. Use the time you have to gather receipts for reimbursement or make plans to use the remaining funds.
  8. Meet with your financial advisor and your tax advisor to finalize any moves for 2015 and set your strategy for 2016.

Bryan J. Bentley is an investment advisor at 
Bentley Financial. For more information, 
call 916.877.5125 or visit MyBentleyFinancial.com.

Investment Advisory Services offered through Retirement Wealth Advisors, (RWA) a Registered Investment Advisor. Bentley Financial and RWA are not affiliated. Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. This article is designed to provide general information on the subjects covered. Pursuant to IRS Circular 230, it is not, however, intended to provide specific legal or tax advice and cannot be used to avoid tax penalties or to promote, market, or recommend any tax plan or arrangement. 
Please note that the author does not give legal or tax advice. You are encouraged to consult your tax advisor or attorney.