Year-End Personal Finance Review

Financial GoalsDecember 31 marks the end of the tax year for many taxpayers and deadlines in regards to tax deductions and required minimum distributions. This presents an opportunity to review the year, use strategic tax planning to reduce tax liability, and plan for next year. Examples of items to review:

Flexible Spending Accounts: Make sure you have used any funds that will not carry over to the next year.

Marginal Tax Rate: Your marginal tax rate (AKA tax bracket) is the rate you pay on your last dollars of income. Knowing your bracket is a key step to tax efficient planning and investing. For example, it will help guide decisions regarding retirement plan contributions and whether to use Roth or Traditional accounts. Check out the tax bracket fact sheet posted to the Hillsborough County Extension web site http://hillsborough.ifas.ufl.edu/tampa-bay-saves/

Retirement Plan Contributions: December 31 is the last day that deductible contributions to workplace retirement plans will reduce 2016 taxable income. The deadline to contribute to Individual Retirement Plans (IRAs) is April 17, 2017.

Charitable Contributions: Charitable contributions made by December 31 to qualified organizations are deductible. This deduction will only apply if you itemize deductions.  You can access a database of tax exempt organizations at the IRS web site www.irs.gov

Tax-Loss Harvesting: Tax-loss harvesting is selling investments that have lost value to offset taxes owed on investment gains. It is best to work with a financial advisor to evaluate options. The goal is to balance tax efficient strategies and long-term investment goals.