Blog by Brian Biggs, CPA – Storen Financial

Fall is just beginning and it may seem early for yearend financial planning but don’t procrastinate on planning ideas. Investors need to give themselves and their advisor time to consider if an idea would be helpful and then have time to act on it. Some tax and investment strategies need to be started now to give them time to work and others face IRS deadlines to execute.

Here is a list of 7 items to keep in mind as the year winds down…

1) Max out company retirement plan contributions.

Whether it’s with a yearend bonus or by upping your payroll contribution, targeting the IRS maximum contribution amount can be helpful now (tax savings) and in the future (more retirement savings). The 2019 retirement plan contribution limits are $19,000 for those under 50 and $25,000 for people 50 and over.

2) Contribution to a College 529 Savings account.

The tax benefits from the federal government for these accounts do not happen until funds are withdrawn and used for qualified education expenses. The growth on the accounts will not be taxes when used for approved college costs.  But Indiana offers a 20% tax credit annually on the first $5,000 added to an Indiana CollegeChoice 529 account. The account needs to be open and funded by 12/31/19. Another great way for current and future tax savings.

3) Review required minimum distributions.

Clients who have inherited IRA account and are stretching the distribution over their lifetime, must take a required minimum distribution (RMD) from the inherited IRA each year, regardless of client’s age. To avoid costly penalties, the RMD must be taken from the account every year before December 31.

4) Do a Back-door-Roth IRA contribution.

If income exceeds the limit enabling a contribute to be made directly to a Roth IRA, there is still a way to add money into the Roth account. We can create this opportunity by first contributing to a non-deductible traditional IRA and then converting the funds to a Roth IRA before the end of the year.

5) Prepare charitable donations and planned giving.

There are tax benefits of gifting cash, or other assets, to charity. With the higher limits for the standard deduction, getting a tax benefits for charitable giving is more difficult. Please continue to give to your favorite church or charity by the end  of the year and we will determine if there is any the tax benefit when the return is prepared. Charitable gifts can be “bunched” where two year’s gifts are given in a single year and then skipped the following year.

6) Review health insurance and your health savings account.

 After maxing out the 401(k) plan, a great second goal is to contribute the maximum to a health savings account (HSA), if eligible. The 2019 maximum contribution for a family plan is $7,000 and $3,500 for single coverage. This amount does include funds contributed by the employer into the account. Funding for an HSA need to be done by 4/15/2020.

7) Check your flexible spending balance.

An employer-provided dependent care and/or healthcare flexible spending account (FSA) does not allow for a balance carryover from year to year. It is a “use-it-or-lose-it” arrangement and you forfeit unused funds. Plan accordingly when funding and spend the money before year-end.

Have questions about any of this information? Give us a call now!

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor. Traditional IRA account owners should consider the tax ramifications, age and income restrictions in regards to executing a conversion from a Traditional IRA to a Roth IRA. The converted amount is generally subject to income taxation.