2018 is quickly coming to a close, and with it, the close of the 2018 Tax Year. While no one needs more responsibilities in December, if you add these to your list, you will thank us when you do your taxes in April!
1. Make Contributions to 529 Plans. If you are saving for college, squeeze in any last contributions before December 31st. For Pennsylvania state income taxes, these contributions are tax deductible, so be sure to include a print out or summary of your 2018 contributions when you meet with your tax advisor!
2. Be Charitable. Make any last minute monetary charitable gifts or in-kind (non-cash) donations. Have the kids clean out their toys before Santa visit, but don’t forget that for non-cash charitable contributions over $250 you'll need a receipt that includes a description of the item and other details. Keep track of your donations to charities in all form and consider strategies that may qualify you for larger tax deductions. Donations for the current tax year must be made by December 31. If you charge your gift to a credit card before the end of the year, it will count for this year, even though you might not pay the credit card bill until 2019.
3. Take IRA Required Minimum Distributions. Friends do not let friends miss RMDs. If you, your family members or your friends are 70.5 and have an IRA, they are required to take a Required Minimum Distribution (RMD) by December 31st. If they do not take the RMD, the penalty is 50% of any amount that is not withdrawn in time. If you have any doubt, call your financial advisor or institutions to confirm your RMD amount.
4. Review Gains and Losses. This is a good time to review your portfolio. If you have lots of gains (lucky you!), you may want to consider selling some losers to reduce your tax liability. Bear in mind, though, that you can’t buy back the same holding you sold at a loss within 30 days or else you’ll run afoul of ‘wash sale’ rules. And remember that the IRS limits your deduction to $3,000 of capital losses per year (any unused losses can be carried forward into future years).
5. Use your Flexible Spending Account dollars by December 31st. For most plans, it’s use it or lose it; if you have not spent the funds by December 31, 2018, you forfeit them. Do not waste this money! Many nonprescription items qualify, so if you have any unused FSA dollars, maybe some sunscreen or contact lens solution will be your stocking stuffers this year?