With the end of 2018 fast approaching, now is a great time to give your finances a review. The following financial planning moves, if appropriate for your circumstances, are items to consider as we wrap up 2018 and look forward toward 2019.
Contribute to 529 Plans
529 accounts are very powerful tools for college savings. Earnings within the account grow tax-free. Withdrawals from the account, if used for qualified college education expenses, are also tax-free. The recent tax law changes now allow for up to $10,000 a year to be used for private elementary or high school education expenses. While it is never too late to contribute to a 529 account, the earlier you make the contribution the more time your contribution will have to grow. You will need to contribute by year-end to have the contribution qualify as a 2018 gift (up to $15,000 tax-free).
Fund Your Health Savings Account (HSA)
HSA contributions are made using pre-tax income. These contributions are also tax deductible and any earnings in the account are tax-free. Withdrawals from HSA’s will not be taxed if they are used to pay for qualified medical expenses. The contribution deadline is the April tax deadline, without extensions. Confirm with your current health insurance plan to find out whether you are eligible to participate in an HSA.
Spend Money in Your Flexible Spending Account (FSA)
Generally speaking, you need to spend the money in your FSA account by the end of the plan year. However, there are exceptions as certain plans allow for a carryover or grace period. You should check with your employer to see if either of these is offered to you. If you plan does not allow for either of these, you will want to get doctor or dental visits in before year end. Also consider pre-ordering any medical prescriptions or eyeglass prescriptions, as these are eligible FSA expenses.
Fund Retirement Plans
You still have time to max out your 401k and your IRA’s. The deadline to make contributions to these accounts is April 17, 2019. For 2018, you can contribute $18,500 to your 401k, $24,500 if you are over the age of 50. You can contribute $5,500 to your IRA’s, $6,500 if you are over the age of 50.
With the recent tax law changes, it is important to review your withholdings and estimated tax payments to make sure they are still accurate and reflective of your situation. Getting a big refund from the IRS because your withholding or estimated payments were too high is not necessarily a good thing. Essentially you gave the government an interest-free loan. On the flip side, not having enough withheld or not paying enough on your estimated payments can result in a larger tax bill than you were expecting, which would be an unwelcome surprise.
Now is a great time to look back and review this past year from a financial standpoint. As we finish 2018, there is still time left to address your financial situation and make any changes as you see fit. From there, you can begin to plan for 2019 so you can start the year with your best foot forward.
As always, if you have any questions specific to your situation please do not hesitate to contact us.
*This article is provided for informational purposes only and should not be interpreted as investment advice.