Fall has officially arrived, and there are some financial actions you may want to consider making before 2019 wraps up. Given you have a few months before the “closing bell’ so to speak of the year, you have some time to tackle items on your fall financial to-do list.
Feel free to grab a spiced latte as we go over some tasks you may want to accomplish this fall:
Search for Tax Bunching Opportunities
Due to the changes in tax reform, the job of locking in various deductions before the end of the year has become less suitable because fewer people are itemizing on their returns. Many of the year-end strategies that were employed are not fitting anymore.
However, it’s possible that you can group some deductions by compounding them one year to qualify for itemizing, then omitting them the next year. This method is more viable with significant, more maneuverable expenses such as donations to charity. Unreimbursed medical costs may also fall into this category, but keep in mind they qualify for a deduction at the federal level to the point that they exceed 10% of your income.
For itemizing to make sense for 2019, single individuals require more than $12,200 in deductions, and married couples need $24,400. If you fall outside of these brackets, taking the standard deduction is your best move.
Reap Your Losses
While you think through ways to save on your taxes, contemplate selling investments that are showing losses on paper. If your losses outweigh your gains, you may be able to deduct losses up to $3,000 from your ordinary income and also bring forward the amounts that you do not use to apply in future years.
Keep in mind that you can’t deduct losses in Individual Retirement Accounts (IRAs) and 401(k) accounts. This method is logical to consider when you are selling unsheltered account assets.
Gather Your Gains
The other side of reaping your losses would be to sell your investments for a gain before the end of the year. If your income is on the range of the 10% or 12% ordinary-income pay bracket, you may be able to take advantage of a 0% long term capital gain rate, meaning you would pay no tax on your qualifying investment profits.
Since this strategy is less likely to help those who tend to hold on to investments, middle and upper-income taxpayers, it doesn’t get as much fanfare as tax-loss harvesting. It’s essential to keep in mind that if you’re selling a more substantial investment, the gains may be enough to nudge you into a higher income earning bracket.
Know Your Benefits
Make an effort to understand the benefits you receive through your employer as part of your fall financial to-do list. Many people don’t take the time to research their options during their late-year open enrollment period, which sometimes results in making errors such as missing out on helpful car insurance discounts and legal plans.
Many employees don’t fully comprehend their benefits. In a study by the International Foundation of Employee Benefit Plans, 80% of participants do not even read their benefits materials.
Use Automatic Contribution
If you haven’t already, take advantage of a 401(k) or similar retirement plan if your employer offers it. Additionally, think about routing additional funds from your wages to investments.
A big plus of 401(k) and similar programs providing auto investing is that participants are less likely to notice the money taken from their paycheck after a time. Also, investors are less likely to tinker with their investment strategies when they are taking part in a plan with auto investing features, opening themselves up to behavioral investing errors.
Downsize Your Memberships
The dwindling months of the year are a great time to look at your budget and what rarely used facets of your financial world you can whittle down, such as gym memberships, apps, and other subscriptions. Many of these memberships have auto-renewal features that go unnoticed, and you can get wrangled into another year of fees because it slipped by you. Look at the membership rules and opt-out when you can if you know this is not a service you will be utilizing.
Do A Credit Review
It’s wise to look at your credit history and score now and again; preferably at least annually. Since breaches in security are, unfortunately, part of our reality in this age of technology, it’s become even more critical. Also, take time to scrutinize credit card and bank statements for fraudulent transactions or errors. Even a relatively small blip in the math can indicate fraudulent activity. Establish alerts for your accounts that contact you if you have a low balance or suspicious activity.
Make an effort to order your credit report from each of the credit bureaus: Experian, Equifax, and TransUnion. You can do this free of charge, so there is no reason not to!
Document Your Belongings
In a time of drop ship instant gratification, we can start to underestimate how many possessions we have. If you experience damage by fire or burglarized, you will be happy to have an account of your personal items. Being able to prove what belongings were destroyed or taken will go along way in supporting insurance claims.
This task can be one of the easier ones on your fall financial to-do list since it can be as easy as walking through your house with a camera taking video or photos. If you’d like to take it a step further, you can make a note of model numbers of some of your more expensive possessions or store receipts of purchase.
Take a Fresh Look at Your Estate Plan
It’s a good rule of thumb to review your estate plan annually to make sure you have the correct individuals designated as your beneficiaries. Ensure that your selections are still fitting, given the fact that relationships between relatives or friends may have changed, or someone on our list may have even passed away. You should check beneficiaries for your trusts, wills, retirement, and insurance accounts. It’s also wise to update your health-care and financial powers of attorney if they’re over one or two years old. You will want all documents to be up to date and current to ensure they will be considered legally valid.
As the year winds down, it’s an excellent time to address your fall financial to-do list and knock out some of those financial goals. Taking the time to do so now will ease the end of year rush for some of these tasks is they’re time-sensitive and prepare you for an organized and successful financial year to come.
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