It seemed summer would never end, yet here we are close to ringing in another new year!
Soon our attention will turn to holiday plans, perhaps some travel, and if we are fortunate enough, family gatherings. Before we get too involved with menus, shopping lists, and flight itineraries, let us not forget to tie up any loose financial planning opportunities for the year.
Listed below are several year-end planning ideas for your consideration:
1. 2020 Tax Projection
Due to the many tax revisions included in the SECURE and CARES, it may be a good idea to have your tax preparer run a 2020 projection. There is still time to take advantage of tax planning recommendations. Having the projection will also avoid surprises at tax time.
2. Maximize Contributions to Retirement Plans
If you participate in an employer provided plan, you probably have at least two more payroll periods from which you can contribute. If you participate in an individual plan such as a SEP, Traditional, or ROTH IRA, you have until the tax filing deadline to make your contribution.
3. Take your Required Minimum Distribution
If you are over 72, retired, and have a qualified retirement plan, you probably are required to take a minimum distribution. Failing to do so can result in significant penalties.
4. Fully Fund your Health Savings Account & Use Amounts in your Flexible Spending Account
Health Savings Accounts are a tax-free way to save for future health care expenses, and unused amounts are carried over from year to year. They can also be used as an additional tax-advantaged retirement account. If you wait till 59.5 yrs. to withdrawal funds for any reason you avoid the 10% penalty. Flexible Spending Accounts, on the other hand, may allow a small amount to be carried over to the next year, or give you a limited amount of time (2.5 months) to utilize the funds after year-end before they are forfeited. Be sure you have submitted all qualified claims to avoid forfeiture.
5. Complete 2020 Gifting
Year-end is a great time to consider charitable gifts including cash, unused items, appreciated stock, or a portion of your required minimum distribution. You may also want to take advantage of the 2020 annual gift tax exclusion of $15,000 to make gifts to children, grandchildren, or other loved ones without triggering a gift tax return.
6. Fund 529 College Savings Accounts
These accounts can actually be funded until July 15, 2020, for the 2019 tax year. However, while you are tying up your loose ends you may want to take care of this, too. Remember, if you are a South Carolina resident and use the SC 529 Plan, you can deduct these contributions on your South Carolina Tax return.
The Holiday Season can be hectic and at times stressful. We hope these gentle reminders will help you stay on track with your goals and increase your financial peace of mind in the year ahead.
This material has been prepared for information purposes only, and is not intended to provide, and should not be relied on solely for tax, legal or accounting advice. This commentary represents the opinions of Greenwood Capital Associates, LLC and is for informational purposes only. Investment Advisory Services are offered through Greenwood Capital Associates, LLC, an SEC-registered investment advisor.