As the year winds down, you should consider some of these strategies before your opportunity is lost. Here are a few suggestions that I have:
- FSA Funds (Flexible Spending Accounts) - If you have an FSA account, you'll need to use it or lose it before the end of the year. Spending on eligible medical expenses, prescriptions or healthcare items, like eyeglasses are all viable options.
- Tax Loss Harvesting - If you have investments that have lost value since purchasing them, you could sell some and recognize the loss against capital gains, which may help your tax burden. Just remember, the "Wash Sale Rule" states that if you sell something at a loss, you cannot repurchase the same or substantially the same asset within 30 days and get to declare the loss.
- RMD's (Required Minimum Distributions) - Don't forget, if you've reached the age of 73 the IRS requires you to take money from your IRA and pay tax. The penalty for not doing so is 50% of the required amount.
- QCD's (Qualified Charitable Distributions) - If you're at least 70 1/2 and charitably inclined, you can have your IRA custodian send a charitable contribution directly to your charity of choice. By doing so, you will not receive a 1099 distribution, that you would normally show as income. And if you're over age 73 the QCD would count towards your RMD as well.
- Recognize Income - If your only source of income is social security, or maybe you're in business and show very little income since you have lots of tax deductions, consider pulling money out of your IRA (assuming you're over 59 1/2). A married couple has up to a $29,200 standard deduction to offset taxable income. Just be aware, under 59 1/2 you could be subject to a 10% early distribution penalty and ordinary income taxes.
These are just a few of the end of the year ideas that may help with your financial planning. If you want more information about these or other strategies, give us a call.