End-of-the-Year Money Tips
5 year-end tips to make the most of what you have
-Laura Weber Rossman
With the current state of the economy, every penny counts. So, here are five year-end tips for making the most of your hard-earned dollars.
1. Retirement savings.
If you can afford to, contribute the maximum amount allowable into your employee retirement account (401K or 403B). Remember, there are two tax benefits at work. Because your contribution is deducted from your compensation before taxes are calculated, your taxable income is lower, so you pay less income tax. And the money in the account grows tax free. If you contribute to an IRA, you have until April 15 to make your contribution. But it’s not too soon to think about how you are going to fund it.
2. Flexible spending account (FSA).
If you’re lucky enough to have an FSA for health care through your employer make sure you use every bit of the money by the end of the plan year. By law, anything not used cannot be returned to you. Healthcare FSA’s contain money you set aside on a pre-tax basis to pay for eligible medical, dental and/or vision care expenses not covered by insurance. You may have one for childcare expenses too. So, if you’ve got money left, go buy that pair of flirty glasses you’ve wanted. Stock up on over-the-counter drugs. Fit in the last minute dental appointment and start the New Year with a bright smile!
3. Charitable contributions.
This year more than ever charities need your support. Their budgets have been hit by the financial crisis as more people are calling on them for support. So if you can spare it, write out a check or contribute online to your favorite charity. If you write a check, the tax rules say it has to clear by Dec. 31. Beyond the tax benefits, here’s another reason to make a donation. It is often said that a generous soul lives a rich, abundant life. A “helpers high” can make you feel stronger, more energetic and counters the harmful effects of stress.
4. Donate things you don’t need.
Face it. Your closets are cluttered with the “must haves” of yesterday and things you or your family have outgrown. Declare a “declutter weekend” and clear out all those things you no longer use and donate them to a local charity. The charity will be able to provide items at a low cost to those in need and raise much needed cash for their good works. You’ll be able to take a tax deduction if you donate by the end of the year. Remember, you need a written receipt for all charitable donations, regardless of the amount.
5. Deductible expenses.
If you have already met your health insurance deductible are there any other last minute health expenses you can take care of before the end of the year? Book that appointment in January and you’ll be meeting your 2009 deductible first. You can also accelerate payments on other deductible expenses like state and local taxes, mortgage payment or property tax. Pay them in December rather than January and you’ll reap a deduction on your 2008 tax return.
One final thought – if you are in the lucky position to be able to gift money to an individual, that too has a Dec. 31 deadline. The limit is $12,000 per individual and they recipient pays no gift tax. Now that’s a tip that might be worth passing on to Mom and Dad.