Just in time for the holidays, here’s another to-do list. This one won’t help you plan parties, finish shopping for gifts or survive family visits. But it may help you save money when, in just a few weeks, tax season rolls around.
Even though this time of year can be stressful and overbooked, consider taking a few minutes to tackle these three year-end financial planning tasks.
1. Do a dry run on your taxes.
- Before the end of 2018, start a dummy tax return using the income figures you already have. Preparing a “dry run” tax return will give you an approximation of what you may owe, or how big a tax refund you may receive.
- Use your most recent pay stub to estimate your total wages and tax withholding for the year. A bank statement can substitute for any 1099 documents you expect to receive. Running the numbers ahead of time gives you the chance to make last minute adjustments to help you save, like adding money to a Health Savings Account, or adding to an Independent Retirement Account (IRA).
2. Max out retirement fund contributions.
- In fact, if you haven’t reached the maximum annual contribution allowed into your personal IRA, company 401(k) or 403(b), now is a great time to top off those savings. Putting extra money into a 401(k) or IRA not only helps you save for the future, it may help reduce your 2018 tax bill.
3. Give to your favorite charity.
- Charitable donations made before the end of the year may also be tax deductible. And while it’s always good to donate cash, consider donating the gift of appreciated stock. Charitable donations of appreciated stock may allow you to avoid capital gains taxes that would otherwise apply.
- Whatever forms your donations take, you’ll have the added satisfaction of knowing you’ve helped people in need.
In addition to helping others, you’ll be helping yourself too, because money moves made at the end of the year can have an impact well into the new year and beyond.
