#327 End-of-the-Year Checklist

College Saving Plans

For those are you that are contributing to 529 education savings plans or private school education remember, as an Alabama taxpayer, an individual filer can get a $5,000 state income tax deduction and joint filers can get up to a $10,000 state tax deduction. Those contributions must be in before year end on December 31 for it to count for 2018. Those contributions can be new contributions or rollovers from a 529 plan in a different state.

Flexible Savings Accounts

FSA accounts are a great way to contribute pre-tax dollars through your employer in order to pay for medical expenses throughout the year. You can pay for deductibles, copays, medicines, and other medical related things except for insurance premiums. The downfall is that flexible savings plans have “use it or lose it” stipulations on them. If you don’t use the FSA dollars by the end of the year you can lose that money. Some employers have extension times or rollover options on their plans. Some will allow you to use the funds for as much as two months after year-end or you can roll over up to $500 to the next year. However, not all plans have these features so make sure you are paying attention to your plan and what is left to use for the year so that you can take full advantage of the FSA account. If you have any funds available, plan to purchase your medicine, contacts, and go to doctors’ appointments to use the money before year-end.

Charitable Giving Deductions

Any charitable donations must be in before December 31, 2018 to count for the tax year. It’s always a good idea to keep your receipts in case you ever need it or get audited in the future. This year there was a change to the tax code. People that have been giving to charity before might not be able to use those donations as an itemized deduction this year. The standard deduction amounts were increased and some other itemized deductions, like state and local taxes, have been decreased. However, there are ways to front-load charitable donations. Donor-advised funds allow you to give a larger contribution in a year and will give the full tax deduction in the year you donated. You can put what you plan to donate in a fund and let it grow. This will allow you to give the charitable donations as much as you want at a time and can be left in the account year after year until you are ready to give donations out of it.

Required Minimum Distributions

For those who have inherited non-spousal IRAs or have IRAs and are over 70 ½ years old, you are required to take a distribution from your IRA before the end of the year. If you don’t take that money out before the end of the year and pay taxes on it, you will be hit with a 50% penalty. It’s very important to take the RMDs before the end of the year to avoid that hefty penalty.

Tax Loss Harvesting

If there are any positions in your portfolio that are trading at a loss, you have the option to sell those, take the capital loss and apply it to other capital gains. Also, $3,000 of those capital losses can be applied to other ordinary income. There are very specific rules around these transactions, so you want to talk to your advisor before you do this.

2019 Contributions

Looking into the next year, 2019, IRA and ROTH IRA contributions for 2018 can be made up until April 15th, 2019 or when you file your tax returns. The contribution limit is $5,500 for 2018 but will increase to $6,000 in 2019. The year 2018 came with tax law changes so it might be a good idea, after you file your tax return, to revisit your withholdings to make sure going forward you are not withholding too much or too little. The earlier you look over your withholdings the better so that if there are any adjustments, they can be spread out over the year. Also, look at your 401(K) and decide what you want your contributions to be in 2019 and going forward. The limits on 401(K) contributions have increased by $500 for 2019. A new year can lead to new opportunities to start out on the right foot. You can use this as an opportunity to work on things like fitness, weight loss, and even your finances. You can start 2019 with a plan to budget, start saving or pay off debt. The beginning of a year is the perfect time to start looking at all these things.


Jay McGowan, CFP®, CPA, PFS
Senior Vice President
Director of Financial Planning
Email Jay McGowan Here


Fi Plan Partners is an independent investment firm in Birmingham, AL, serving clients across the nation through financial planning, wealth management and business consulting. Fi Plan Partners creates strategies in the best interest of their clients using both fee based investing and transactional investing.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

Economic forecasts set forth in this presentation may not develop as predicted.

No strategy can ensure success or protect against a loss.
Stock investing involves risk including potential loss of principal.

Securities and advisory services offered through LPL Financial, Member FINRA/SIPC and a registered investment advisor.

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