New Year's is the obvious time to make resolutions to improve in body, mind, or spirit. But financial goals may require action or commitment before Dec. 31. Don't wait until the end of the year to make these 16 money moves.
16 Things to Do With Your Money Before 2016
Anyone without a budget or way to track expenses should get started with one of the many free online options. Popular programs such as Mint, LearnVest, and You Need a Budget pull in data automatically from credit cards and bank accounts. Already have a budget? Re-examine your spending and savings and make adjustments if your goals have changed or remain elusive.
If you're expecting a bonus from work or gifts of money from family, decide now to spend or save the money wisely -- and stick with the plan once the money is in the bank. Some smart options: Pay off high-interest debt, contribute to an emergency fund or retirement account, or learn a new skill by enrolling in an online or local class.
Many tax-related moves must be made before the end of the calendar year. To figure out what those are, taxpayers should at least estimate income, deductions, expenses, investment gains or losses, and retirement contributions.
With a few days off and the help of visiting family members, the holidays are a prime opportunity for home improvement purchases that will pay for themselves in energy savings. Energy-efficient appliances, LED light bulbs, and a programmable thermostat are all worth considering.
For people managing their own investment portfolios, the end of the year is a good time to make sure asset allocations are in line with personal and financial goals. Sell or buy assets as needed to maintain the target mix.
Selling assets at a loss can help offset taxes on capital gains. For funds in a non-retirement brokerage account, up to $3,000 in capital losses can be deducted against capital gains -- and excess losses roll over to the next year.
People with adjusted gross income of $37,450 or less pay no tax on capital gains when selling assets held for longer than a year. Taxpayers close to that line may be able to reduce their AGI by making pretax contributions to a 401(k), IRA, or other retirement plan, or researching other tips for lowering taxable income.
Giving to charities is an annual tradition for many families. In addition to helping the community or the less fortunate, there is a financial reason to give: Donations to 501(c)(3) and some 401(c)(4) charities are tax-deductible and can lower taxable income for those who itemize deductions.
As an alternative to cash donations, consider giving charities appreciated assets (investments that have a higher market value than book value). The giver gets to write off the current value of the assets, and charities can sell investments without paying taxes (unlike the giver, who would owe taxes on the capital gains).
In 2015, up to $14,000 in cash or assets can be given to another person tax-free. (The amount rises year by year to keep up with inflation.) Some people use this as an opportunity to distribute an inheritance early and avoid estate taxes. This is a per-person limit, so a couple can give other people up to $28,000 tax-free.
Contributions to a traditional 401(k) must be made by Dec. 31 to be tax deductible for 2015. The limit has been raised to $18,000 this year, or $24,000 for people age 50 or older. Contributions to an IRA can be made through April 15 and still be deducted for the 2015 tax year.
The retirement savings contributions credit gives taxpayers an extra incentive to save for retirement. Contributing to an IRA, 401(k), or other employer-sponsored retirement account earns up to $1,000 in credits for individuals and $2,000 for married couples. There are income limits of $30,500 for individuals, $45,750 for heads of household, and $61,000 for married couples filing jointly.
Some workers have flexible spending accounts that let them pay for medical expenses with pretax money, and there's an annual "use it or lose it" rule. Check the balance or ask a company benefits manager how much money is left to be spent. Some employers offer a two-and-a-half-month grace period for leftover funds, or roll over $500 to the next year.
People older than 70.5 must take a required minimum distribution from an IRA or employer-sponsored retirement account before the end of the calendar year. (There are many calculators online for determining your RMD.) Skipping this withdrawal comes with a big penalty -- paying the ordinary income tax plus a 50 percent tax on the amount that should have been withdrawn. Taxpayers who just reached 70.5 this year have until April 1 (but still have to take another RMD before the end of 2016).
Although taxes must be paid on the amount converted from a traditional IRA, a Roth IRA has benefits: Contributions are allowed at any age (taxpayers 70.5 or older can no longer contribute to a traditional IRA); there are no required distributions; and earnings are withdrawn tax-free as long as the account has been open for five years and the holder is at least 59.5 years old.
Business owners and sole proprietors can lower their adjustable income for the year by making business purchases by Dec. 31. Now could be the time to book that work-related class or conference, or buy that new office chair or computer.