Now’s the time to minimize your 2015 tax bill and plan for a more cost-efficient 2016.
Year-End Financial To-Do List
Maximize 2015 deductibles
With the help of your tax professional, review your spending data to see what you can do to minimize your taxes, including:
• Ask your employer to postpone giving you a 2015 bonus check until January.
• Complete any planned 2015 donations to qualified charities and non-profits before December 31.
• Pay any 2015 real estate taxes before December 31.
• Empty out any Flexible Spending Account you may have for health care or other qualifying expenses. Note: You can only transfer $500 in your remaining FSA balance over to the next year.
Check and rebalance your portfolio
Are your retirement and other investments on track with your current goals? Do the percentages of asset classes you own—stocks, bonds, alternate investments or cash—still fit your needs, or do you need to readjust your holdings? If you need to sell securities in which you have suffered a loss, be sure you do so before December 31, so you can deduct 2015 losses from 2015 gains.
Exposure to federal estate tax
The 2015 estate tax exemption for most states is $5.43 million. But 13 states and Washington, D.C. have lower estate-tax thresholds than the federal government. If you live in one of these places, here are three ways to protect your estate from federal taxes without incurring gift taxes:
1. You can gift assets worth up to $14,000 to whomever you wish without filing a gift-tax return.
2. Direct payments to someone’s medical service provider are exempt from gift taxes.
3. Direct payments to a college or university to cover someone’s tuition are not subject to gift-tax rules, so you can give more than $14,000 a year without worrying about the tax.
For a more cost-efficient 2016
Check all subscriptions
Review your print, video, online, theater, organization, etc., subscriptions. Eliminate those you no longer need or want.
Check Internet, landline, cellular, cable bills
If you aren’t using your landline, maybe it’s time to get rid of it. Make sure your cable and Internet package meets your current needs. It’s a good idea to check with customer service to find out if there are options that could help you save money.
Get your final credit report of the year
You are entitled to one free copy of each of your three major credit reports from TransUnion, Equifax, and Experian. It’s a good idea to schedule delivery for each report at different points during the year to catch errors or irregularities.
Switch to online bill pay and deposits
If you haven’t done it yet, consider scheduling automatic bill payments through your checking and savings accounts. It eliminates the risk of late payment fees and saves both time and money.