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Year end financial checklist

As the year comes to a close, you may already be looking forward to the new year. Don't forget to pause to look back at what happened over the last year.
Year end financial checklist

 Income Taxes

Even though you have until April to file, you want to make sure you get your taxes right as early as possible so you can find ways to lower your bill.

  • Estimate your AGI. Meet with your tax advisor to estimate your AGI based on your wages, business income and investments. Knowing your tax bracket will help you figure out the deductions and credits you can plan on taking.
  • Estimate your taxes. Once you have your tax bracket, estimate your total taxes due. Don't forget to check to see if you will have to pay the Alternative Minimum Tax.
  • Review your tax withholding. Double-check your withholding to make sure it matches your estimated tax bill. Major life changes, such as new jobs, marriage or having children, can throw your withholding off. So can having extra income that is taxable but not subject to withholding. Not only do you not want a surprise tax bill, but paying too little throughout the year could result in penalties and interest.


The saying that it's better to give than to receive applies to taxes as well.

  • Donate to charity. Donating to a public charity can reduce your taxable income by up to 50 percent, while a donation to a private foundation can lower your taxable income by up to 30 percent. The exact limits depend on your income and the type of organization, so be sure to check if receiving the full deduction is important to you.
  • Reduce your estate through gifts. You can give a tax-free gift up to $14,000 per person. If the gift directly pays for qualified tuition or qualified medical expenses, there is no limit on the tax-free amount.


Review your portfolio before the end of December for potential tax-saving moves.

  • Tax-loss harvesting. If you have a position that is down from when you bought it, you can sell it and take a deduction for up to $3,000 in losses. If your losses are more than that, you can roll them over to future years. Keep in mind that you can't buy the same security or a similar one (such as a different index fund tracking the same index) within 30 days, or you'll violate the wash sale rule and lose your deduction.
  • You should periodically review your portfolio to make sure it's still in line with your desired asset allocation. When you do, look for opportunities for tax-loss harvesting in your taxable accounts. Otherwise, try to make any needed sales in your retirement accounts to minimize capital gains taxes.

Retirement contributions and distributions

In addition to holding your investments, your retirement accounts can provide other tax benefits, or create penalties if you aren't careful.

  • Required minimum distributions (RMDs). Beginning with the year you turn 70 1/2, you must take RMDs from your Traditional IRA and 401(k). You must also take RMDs from your 401(k) if you retired before that age. If you don't, the IRS imposes an excise tax of 50 percent of the amount you were supposed to distribute.
  • Max your retirement contributions. Traditional IRA and 401(k) contributions directly decrease your income taxes. If you're in a low tax bracket or have already reduced your income taxes to zero, using a Roth IRA or 401(k) makes your retirement distributions tax-free.

For more information on these steps or other year-end savings tips, ask TDECU Wealth Advisors for help.

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