December already? Year-End Financial Recommendations

December already? Year-End Financial Recommendations

Take a break from online shopping (this year’s Cyber Monday sales were $10.8B with a B!) and consider these financial moves to put you in a good place to end the year.

  1. Roth Conversions: Consider converting some Traditional IRA funds to a Roth IRA (particularly if your income is down for 2020). Why? Take advantage of lower income tax rates.
  2. In a pinch? Take advantage of CRDs (coronavirus related distributions) from IRAs and/or other retirement plans. If you are a ‘qualified individual’ impacted by COVID, you can withdraw up to $100,000 from a retirement account, penalty-free, and spread the income tax owed over three tax years (2020, 2021, and 2022). CRDs must be taken by 12/30/2020.
  3. Feeling charitable? The CARES Act has increased the deduction amount in 2020 on the first $300 cash donation to a qualified charity. Now 100% of your $300 cash donation is deductible on your 2020 tax return as an above the line deduction, even if you take the standard deduction.
  4. Feeling charitable and over age 70.5? Consider making a Qualified Charitable Distribution (QCD) directly from your IRA. This gift is tax-free and if you are also subject to RMDs (required minimum distributions), can offset your RMD amount and significantly reduce your taxable income (donation must be completed before any other funds are taken from IRA; ie, make donation in January 2021).
  5. Make estimated quarterly income tax payments? Make sure to run a 2020 tax projection now to see if you need to adjust your 4th quarter payment (due in January 2021).
  6. Mortgage rates still dropping! Even if you refinanced a year ago, revisit rates to see if refinancing again makes sense.
  7. Any FSA funds left? Use them or lose them!
  8. Protect your identity! Make sure your credit is permanently frozen at all three credit agencies.

Many of the above ideas have stipulations to execute properly. Feel free to reach out to us with any questions.

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