12 Year-End Financial Tips
From 12 lords a leaping to nine ladies dancing, the days before Christmas are filled with joyous gift giving and the spending that comes with them. As the year comes to an end, watch your finances and put more money in your pocket heading into 2021. Try out these 12 year-end financial tips:
- Sell losing stocks to offset winners. You can write off up to $3,000 in losses against income.
- Make a Christmas spending budget and stick to it. There’s nothing worse than buying more than you need to and paying interest 00charges that will appear on your statement in the new year.
- Accelerate year-end income deposits from additional projects or freelance work to take advantage of a lower tax bracket this year (only if your income sagged this year, but you expect to earn more next year). Alternatively, if you had a stellar year this year, defer income until next year to minimize your tax hit.
- Take deductions and decrease your tax bill. Make your January mortgage payment before the end of the year and get the deduction this year. The same holds true for state, local and real estate taxes.
- Donate to your favorite charity. Put it on your credit card by December 31, and you’ll get the deduction this year – even though you won’t pay for it until next.
- Fund your 401(k) to the max (if this year’s been good to you). In 2020, the annual contribution is $19,500. The $19,500 amount may be increased in future years. If you’re 50 or older, you can add an additional $6,500 this year; the $6,500 amount may also be increased in future years.
- Use your flexible medical spending account! Visit the doctor before year’s end and handle that pain that’s been pestering you.
- Make a family member’s Christmas really special by giving a tax-free gift of up to $14,000.
- Shop for business equipment and place it in service before January 1. It qualifies for a deduction this year.
- Convert a Traditional IRA into a Roth IRA. You’ll pay taxes this year, but it will grow tax-free for the rest of your life.
- Reduce holiday spending by giving friends the gift of time. Offer coupons for free babysitting or home-cooked meals.
- Create financial goals for next year. This will help you stay focused going into the new year. How much do you want to save? What big-budget items do you want to buy and how will you fund them? Our My Finance tool in digital banking will help you get started.
These tips should help you finish out the year with more cash in your pocket, and less partridges in pear trees filling your living room.