Personal finance: Money moves to make by Dec. 31
Amid the hullabaloo of the holidays, “it’s easy to forget one very important activity that must be on your to-do list: an end-of-year financial check-in,” said Chris Hogan in FoxBusiness.com. Before Dec. 31 rolls around, “you need to make sure you’ve done everything you can to maximize your retirement savings and minimize the taxes you’ll pay in 2018.” If you haven’t hit your $18,000 annual 401(k) cap (or $24,000 if you’re 50 or over), consider increasing your contribution in the last paychecks of 2017. “You can even have your yearly bonus go into your 401(k).” Minimizing your taxes “is more complicated,” thanks to the tax reform bill being hashed out in Congress, said Jill Schlesinger in the Chicago Tribune. This will probably be the last year that you will be able to deduct state and local taxes and also take advantage of miscellaneous deductions, such as tax-prep fees and professional dues, if they exceed 2 percent of your adjusted gross income. “If possible, try to bunch as many of these costs into 2017 as you can in order to exceed the 2 percent floor.”
Property owners have a lot to consider, said Sarah O’Brien in CNBC.com. The Senate and House tax reform bills both allow property tax deductions only up to $10,000. “Depending on your situation, prepaying 2018 property taxes this year could make sense.” Keep in mind, though, that merely putting the money into an escrow account isn’t enough; the funds have to be disbursed to the tax authority this year in order to qualify. You also “might have to plan on staying put longer.” Homeowners can currently avoid capital gains taxes on the first $250,000 (or $500,000 for joint filers) they make when they sell their home, if they’ve lived there for two of the past five years. Both tax bills increase that to five of the past eight years.
The stock market’s bumper year also makes it “a good time to revisit some key investment lessons,” said Russ Wiles in AZCentral.com. In 2017, the market has “gone entirely in one direction: up.” Don’t let this breed complacency or overconfidence; the market will not “deliver such a smooth ride” every year. “Take some profits off the table and reinvest the proceeds in assets” that haven’t done as well. Perhaps your goal is to have a 60-40 mix of stocks and bonds. “If the lengthy stock-market rally has pushed your ratio to 65-35, it might be time to sell a portion of your stocks and reinvest the proceeds in bonds, to get the mix back to 60-40.” ■