Were you less than satisfied with your financial situation at the end of 2014? If so, making tax-smart decisions in 2015 could provide a helpful course correction. Here are some suggestions to get you started on the right path.
1. Get structured. That out-of-control feeling from last year might be due to a lack of organization. Set up a simple filing system to arrange your tax papers and records. Once you’re organized, review your monthly expenses and establish a budget you can live with. Online tools can help make that job much easier, or you can give us a call. We’ll be happy to help.
Next, take your planning a step further and create an emergency fund. Consider setting aside six months of living expenses in an account you can tap easily.
2. Be strategic. Examine your investment portfolio for potential tax savings, such as selling stocks that are worth less than you paid to offset your capital gains. You might also donate appreciated stock that you have held for more than one year to charity and avoid capital gains altogether. With the new tax on unearned income to watch out for, consider buying investments that pay tax-free income, such as municipal bonds.
3. Look again. Some everyday tax moves deserve a second look. Review your employer’s list of benefits to make sure you are making the most of them, including the lesser-known perks, if available, such as flexible spending accounts, commuting reimbursements, and employer-paid college expenses. If you have a qualified high-deductible health insurance plan, consider the benefits of a health savings account.
This is also a good time to analyze your tax withholdings and estimates for 2015. Changes to your job, marital status or dependents, a new home, or a serious health issue – all of these life events can affect your tax situation. Adjustments now can put extra money in your pocket when you need it most.
4. Go long. In addition to strategies that yield immediate benefits, think about your long-term finances. Take full advantage of your employer’s retirement matching program. Consider contributing the maximum allowed by law, especially if you are nearing retirement age. In 2015, you can contribute up to $18,000 to your 401(k) plan, plus a $6,000 catch-up contribution if you’re age 50 or over.
Are you ready to think really long term? Review your will and estate plan. Even though the current high-dollar exclusions may shield you from the estate tax, there are still good reasons for you to have a solid plan in place.
If looking back at 2014 leaves you thinking you should have managed things better, take steps now to get your tax and financial plan back on track.