Thursday, April 2, 2020

Retirement and charity moves now can cut your tax bill in April

Photo by flickr user/Tax Credits/(CC BY 2.0)

(Forbes) Don’t let the distractions of a busy holiday season prevent you from making important and timely financial decisions. From donating to charities to putting extra money in your retirement account, here are six money moves to consider making before Dec. 31:

1. Maximize End-of-Year Retirement Contributions
Make sure you are maximizing every opportunity to stash money for retirement, says Christine M. Searle, certified internal auditor and owner of Searle Business Solutions, in Arlington, Va.
“These are your peak earning years and you should lean into your saving goals,” notes Carla Dearing, CEO of Sum 180, an online financial planning firm based in Louisville, Ky.
The maximum amount that employees can set aside for retirement this year is $18,000 – $24,000 if you are 50 or older, due to the “catch-up” rules. However, most plans will require you to set up catch-up contributions as a separate deduction, says Kelley C. Long, a CPA and financial planner with Financial Finesse in the Chicago area.
If you want to make a 2016 Roth IRA contribution, Searle says, you don’t have to do that until you file your taxes in 2017, but you do have to open the account by the end of this year. So be sure you take that step.
2. Donate to Charities
Keep in mind that charitable contributions are deductible in the year they are made. This is true even if you’ll donate by using a credit card in December and won’t make the payment until 2017.
If you’ll be donating clothes or household items to a charity, says Long, get a receipt and take the time to write down the estimated value of each item. Goodwill even offers an online calculator to help you document and tally your donation.

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