Focus On These Year-End Tax Tips Right Now


By Chris Carosa

View the original version online

With holiday cheer abounding all around you, the last thing you want to think about is your personal finances.

Yet, the clock is ticking. Once the old year turns over to the new, a curtain of opportunity slams forever shut.

This is one priority you cannot put off until tomorrow. It is the single most important thing you should be implementing right now.

What is it?

“Proactive Tax Strategies!” says Dan Pallesen, a Licensed Clinical Psychologist and Chief of Investor Behavior at Keystone Wealth Partners in Chandler, Arizona.

If you’re like many, you may still be making adjustments as a result of the new tax laws. “With the Tax Cuts and Jobs Act of 2017 (a.k.a., the Trump Tax Reform) came an incredible opportunity for retirement savers,” says Pallesen. “The tax reform lowered tax rates and increased the corridors within the brackets. This is only a temporary tax bill but it allows so many retirement savers who have been saving in traditional tax-deferred accounts to pay the taxes on those savings (which are inevitable unless they plan to donate to charities) at historically low rates and get those assets into Roth accounts. Sure, their tax bill could be higher in the calendar years they implement these strategies but they could save themselves thousands of dollars in the long run.”

You may not be in a position to convert to a Roth IRA, but that doesn’t mean you’re off the hook when it comes to tax strategies, especially if you contribute to a company sponsored 401(k) plan. “As year-end approaches it’s important to be sure that you’ve met the maximum allowable contributions to your retirement plans,” says Stephen H. Akin of Akin Investments, LLC in Biloxi, Mississippi.

Outside of retirement plans, the waning days of the year represent the final occasion for you to clean up and fix any potential issues that might pop up come April. “You should review the taxes you’ve paid for possible year-end adjustments in an effort to try and break even when you complete your tax return,” says Daniel P. Lash, a partner at VLP Financial Advisors in Vienna, Virginia. “This ensures you’ve kept as much of your money as you could for saving without owing money and possible penalty for taxes.”

The year-end tax checklist is not complete until you look at methods to offset your potential tax liability. “The end of the year is the last chance to take advantage of any tax savings opportunities,” says Wesley Botto, Partner at Botto Financial in Cincinnati. “If you are going to give to charities, now is the time to plan that out. You can take advantage of Qualified Charitable Distributions, and not actually write a check to a charity. This is easier for the retirement saver to give to charity than writing a check.”

Business owners have an additional avenue to cut taxes. Ron Haik, Senior Financial Advisor & Regional Manager, Ontario at Nicola Wealth in Toronto, says, “Pay any deductible expense before then and make charitable giving if you are pre-disposed prior to December 31.”

December ends with a whirlwind of activities, from festive celebrations to tranquil holiday gatherings. It features the excitement of giving and the joy of a brand new year.

Through all this, however, you must not let vital actions slip by without being completed. These actions may be the difference between a future filled with anxiety or one blessed with ease.

“Retirement savers should continue to maximize on saving as the dollars saved today provide them with greater freedom and flexibility tomorrow,” says Michele Lee Fine, President of Cornerstone Wealth Advisory LLC and financial representative with Guardian Life, in Long Island, New York. “It’s pivotal to analyze all of the ‘what ifs’ and assess how their savings will perform with lower rates of return as an assumption and possibly higher tax rates, simply to ensure they are prepared for any scenario. This prudence will inform their current decisions and determine if they are on track or need to increase their pace of saving to ensure they are best positioned for their future.”

If this sounds like a burden to you, such a reaction is not uncommon. Your expertise may be in other fine areas. If the complexities of the tax regime fall outside your comfort zone, feel free to rely on the experience of others.

“Since there have been several changes due to the Tax Cuts and Jobs Act as well as retirement plan maximums, it is important that people consult with a knowledgeable financial planner about what their planning options are as we approach the year end,” says Daniel Beckerman, CEO of Beckerman Institutional in Ocean Grove, New Jersey.

You can position yourself to enter the new year a few steps ahead by tackling tax strategies in December.