Published in the December 23, 2015 – January 5, 2016 issue of Morgan Hill Life
Dan Newquist
As you prepare to close out 2015 and spend some well-earned time away with family and friends, I thought I’d share some “must-dos” before the clock strikes midnight Dec. 31 and we ring in 2016.
1. Top off HSA:
If you have a HSA (Health Savings Account), all contributions added are 100 percent deductible, as long as they’re made by the end of the calendar year.
Individuals can save up to $3,350 (2015), families can save up to $6,650 (2015) and individuals and families 55-plus can save an extra $1,000 (2015)
2. Use all FSA savings:
If your company doesn’t offer a grace period or allow the funds to carry-over, any money left in a FSA (Flexible Spending Account) at the end of the year will be lost.
3. Adjust tax withholding and update beneficiary designations:
If you got married, divorced, or had a child in 2015, consult your tax advisor for recommendations to adjust your W-4 withholdings. If you don’t, you could end up giving the government an interest-free loan, or worse, owe more for not paying enough in taxes.
This is also a good time to update your beneficiary designations on retirement accounts and insurance policies.
4. Max out 401(k) contributions:
In order for 401(k), TSP, 403(b), or 457 contributions to be tax deductible, they must be made by Dec. 31. Workers who are younger than 50 can contribute up to $18,000 (2015) and workers 50 and older can make catch-up contributions up to $24,000 (2015). You should, at the very least, contribute enough to get any employer match.
5. Consider a Roth conversion:
If you will be in an unusually low tax bracket this year, consult your tax advisor to see if it makes sense to take advantage a Roth conversion.
6. Donate to charity:
Any charitable contributions are due by Dec. 31. Consider gifting appreciated stocks instead of cash. If you transfer a security, there is no tax to you, and when the charitable organization sells the security, they is no tax to them.
7. Contribute to a 529 plan:
This holiday season, why not give the gift that keeps on giving? Any money contributed to a 529 plan will grow tax free, which can help your child or grandchild pay for qualified education expenses. Remember, gifts exceeding $14,000 (2015) per person will be subject to a gift tax.
8. Take advantage of the IRS Saver’s Credit:
If you contribute to a qualifying retirement account, you may be eligible to claim the Saver’s Credit — a tax credit worth up to 50 percent of contributions to a retirement plan or IRA up to $2,000 for individuals and $4,000 for families (2015).
9. Take required minimum distributions:
If you are retired and/or turned 70½ this year are required to take their first RMD by April 1, 2016. Your second required withdrawal must be taken by Dec. 31, 2016.
If who wish to avoid having both withdrawals included on your 2016 tax return, then you should make your first withdrawal by Dec. 31 of this year.
10. Be present:
Each year the holidays bring joy, celebration and hope for the future. This time of year also has a way of reminding us of what is really important as it shines light on all that we are grateful for in our lives.
Be present in the precious moments and be eager to move boldly into 2016 by looking forward to all that it will bring.
Dan Newquist, CFP®, AIF®, Principal & Senior Wealth Advisor with RNP Advisory Services, Inc., a registered investment advisor. Reach him at (408) 779-0699 or [email protected]. Securities offered through Foothill Securities, Inc., member FINRA/SIPC, an unaffiliated company.
