15 Essential Year-End Financial Tips
by www.SixWise.com

There are still a few days until you pop open the bubbly to bring in the New Year, and that means there’s still time to give your finances a once-over. True, financial planning should be a year-round affair, but for those of you who want to make sure you have all of your bases covered (or for those of you who may have procrastinated slightly … ), here’s what you need to know.

1. Review your portfolio. The end of the year is a good time to check-up on your portfolio and make sure it’s still on track to meet your financial goals. If necessary, consult a financial adviser for guidance.

2. Max out your retirement plan contributions. These pre-tax contributions to your IRA or 401(k) are a win-win situation, so make sure you contribute as much as you can.

3. Contribute to a 529 college savings plan. Doing so before December 31 may give you an income tax deduction.

4. Getting a year-end bonus? Invest it. It’s important to stick with your long-term investment plan, and adding to it with your holiday bonus is a smart move.

5. Use your flexible spending accounts. Pre-tax money that you’ve set aside in flexible spending accounts will be forfeited if you don’t spend it by the end of the year.

6. Check on your withholding. Whether you make quarterly estimated tax payments or have money withheld from your paychecks, make sure it’s enough to cover your taxes, but not a penny more.

7. Prepay your property taxes. You’ll likely be billed for these twice, once in November and once in February. Paying your February installment by December 31 means  you can deduct it on your 2008 return.

8. Consider selling your bad investments. The losses can be used to offset any capital gains you’ve had this year, plus up to $3,000 in ordinary income. You can also carry over the losses to next year.

9. Approach mutual fund purchases carefully. Annual tax bills to shareholders are typically sent by mutual funds in November or December. If you buy into one before the distribution has been made you’ll have to pay the tax bill even though you just opted in. So make sure to find out if a fund will have a distribution this year, and wait until after it’s been issued to buy.

10. Audit yourself. A self-audit is the only way to find out if you’re spending within your budget or if you need to allocate more of your income to savings, investments or charitable donations.

11. Consider donating appreciating stock. If you’re looking for an especially rewarding form of donation, appreciated stock is it. Not only is your donation based on the fair market value of the appreciated stock, but you avoid capital gains tax that would be due if you sold the stock.

12. If you’re self-employed, prepare for your retirement. A small business retirement account such as an SEP-IRA, an individual 401(k) or another retirement plan will help you make tax-deductible contributions that grow tax-deferred.

13. Stock up on business supplies if you’re self-employed. Purchase as much as you need supply and equipment wise so you can deduct it from your 2008 tax return. Be sure to save all of your receipts.

14. Teachers, remember this important deduction. You can take a tax deduction of up to $250 for materials purchases to further the learning experience of your students.

15. If you're looking for a new car, consider an energy-saving vehicle. Both hybrid and alternative fuel vehicles qualify for tax credits if purchased in 2008.

Recommended Reading

12 Ways to Lower Your Taxes for 2008 Before the Tax Year Ends

Tax Audits: What Signs Make You More Likely to be Audited by the IRS?

Sources

MarketWatch.com December 17, 2008

Charles Schwab October 15, 2008

CBSNews.com November 18, 2007