Making sure your financial ship is in good working order and continually heading in the right direction is an ongoing task. While there are various noteworthy dates when a specific action is required during the year, most notably April 15 for filing tax returns with quarterly tax payments due for the self-employed, many key financial deadlines occur at year’s end. Being mindful of these and acting where appropriate will help you stay on course for success.
Required minimum distributions
The IRS requires individuals 70 ½ or older to take required minimum distributions from certain retirement accounts by December 31 each year or face a penalty. Included are IRAs, SEP IRA’s. 401(k)s, 403(b)s and other defined contribution plans. The penalty may be up to 50% of the amount that was not properly withdrawn.
Health savings account
Those with a High Deductible Health Plan are permitted to contribute pre-tax dollars to a HAS to pay for qualified health and medical expenses. The maximum contribution of $3,500 for an individual and $7,000 for a family must be made by December 31.
Flexible spending account
FSAs allow for pre-tax contributions to pay for healthcare and childcare. At one time, FSAs were a use-it-or-lose-it proposition, in that money not spent by December 31 was forfeited. Most plans now allow a $500 carry-over to the next year.
Employer-sponsored retirement plan contributions
Different plans will have varying maximum contribution limits, but typically, December 31 is the deadline.
529 plan contributions
The IRS does not specify any maximum yearly contribution limits to be made by December 31 to these plans for a child’s future educational needs. However, the IRS treats such contributions as gifts for tax purposes, which do have a $15,000 limit per person per year to avoid tax consequences.
This strategy to sell a security to generate a tax deduction in order to offset other investment income must occur by December 31. Losses are first applied to assets of the same class, and a portion of additional losses may be applied first to other gains and possibly to ordinary income or taxable interest.
Keeping track of all the deadlines and contribution limits involved with finances can seem overwhelming, but the good news is you don’t have to do it all on your own. Spinnaker Investment Group is here to provide whatever level of assistance you need to make your investment goals a reality. Contact us today to get started.
The information contained herein is based on internal research derived from various sources and does not purport to be statements of all material facts relating to the securities mentioned. The information contained herein, while not guaranteed as to the accuracy or completeness, has been obtained from sources we believe to be reliable. Opinions expressed herein are subject to change without notice.