New Year’s Eve is almost here, but don’t let that stop you from making some important money moves before Dec. 31 so you can reap the benefits in 2011.
Check your paycheck
Did you get a raise, a promotion, or tie the knot? If you were lucky enough to increase your income as a result of these or other benefits, you may need to adjust your withholding for December. If you’re withholding too little from your paycheck, you’ll end up with a higher tax bill in April. Contact your HR department to request a withholding change on your W-4 form for more to be taken out of your last few paychecks.
Max out your retirement accounts
Whether your company matches your contribution or not, your 401(k) is still one of your top savings vehicles and you should fund it as much as possible by year-end. The maximum contribution in 2011 is $16,500, plus a maximum “catch-up” contribution of $5,500 for those 50 and older.
Cut your losses
The end of the year is a great time to review your investment portfolio and your asset allocation. If you have a dog of stocks or a mutual fund that you want to eliminate, it’s often a good idea to do it by Dec. 31st. The losses you take can offset the gains you made on other stocks or funds, and help reduce your tax bill.
Check your health
Book last-minute trips to the doctor so you can start 2012 with a clean bill of health — and more tax deductions. Medical expenses used to improve your health are tax deductible if you itemize deductions and they exceed 7.5 percent of your adjusted gross income. If you’re enrolled in your employer’s flexible spending account, use any remaining funds (you can sock away up to $5,000 annually on a pre-tax basis) in them to pay for doctor visits and prescriptions.
Be charitable
This is the season for gift giving, and if you have been one of the lucky ones who did better financially than you expected, maybe you are up for sharing more of it. Donating money is usually deductible — as long as you itemize. If you’re donating goods, like that furniture or clothing collecting dust in the basement, you can receive a deduction of up to $5,000 on your taxes without an appraisal. Just make sure you get a receipt for any donation over $250, and you must use thrift shop value to value the property.
Green your home or Go Green
Now is a good time for you to make energy-efficient improvements to your home so you can take advantage of the Residential Energy Tax Credit. If you make eligible energy-efficient improvements on your principal residence, you may be eligible for a credit of up to $500 for insulation, roofs, or doors if you install them before December 31st.
Source: TurboTax.com