Get ready, get set, year end!

Published: December 13, 2019

By now, Thanksgiving may be a distant memory, and the holidays and the New Year are fast approaching. As you get ready to celebrate with family and friends, take time to ensure you’ve taken care of year-end financial tasks. Checking in can help you remember others in this season of giving, stay on plan with your financial goals, and potentially reduce your taxes for 2019. To assist you, we present our 2019 year-end tips. Your tax advisor, and other experts, can also provide guidance on current tax requirements and potentially offer ways to be more tax efficient.

Participate in tax-deductible or tax-free earnings opportunities. Saving through an individual or company retirement plan remains one of the best ways to reduce your tax burden. Contributions to a corporate retirement plan are typically made on a pre-tax basis and grow in a tax-deferred account and may even provide a company match. For 2019, the contribution limit is $19,000, with an additional $6,000 in catch-up contributions allowable for those over 50. If you don’t have a company retirement plan, contributions to a traditional IRA may be fully, or partially, deductible and earnings grow tax-free until distributed. Your tax advisor can provide more details based on your personal situation.  

Be healthy and wealth(ier). Health Savings Accounts (HSAs), if available through your company’s health benefits plan, are another great way to realize tax benefits. Eligible participants can contribute money on a pre-tax basis, similar to a retirement plan. Funds can be used for qualified medical expenses and never “expire.” That means if you don’t use them in a contribution year, they roll over perpetually. Contribution limits depend on your family situation and age, as there are also catch-up contributions for those over age 55. The added flexibility of an HSA is why, if given the choice, advisors often recommend an HSA over an FSA (Flexible Spending Account). A reminder, though, if you do have an FSA: If you don’t use the money by year end, you lose it. So, if you have any medical expenses you were considering delaying until next year, you may want to reconsider and spend that FSA money before January.

The giving season. If you have not already made your charitable contributions for the year, the clock is ticking. In order to realize tax benefits for 2019, contributions must be officially received by the recipient organization before year end. Bear in mind that the Tax Cuts and Jobs Act may have affected how much you can count as a deduction, and may have changed some rules around itemizing your deductions. Giving to your loved ones may help reduce your taxable estate, while helping to provide for your family’s future. The annual gift tax exclusion amount for 2019 is $15,000 per recipient, and married couples can give a total of $30,000 to an individual. If you are giving to a married couple, for the purposes of complying with the gift tax exclusion, each spouse can receive a gift at the maximum amount, for a total of $30,000 for the year.  

It could be Required Minimum Distribution (RMD) time. You may be required to take an RMD from your individual retirement account (IRA) if you are 70 ½ or older, or own an inherited IRA. Otherwise, you could be subject to substantial penalties. If your account custodians have not contacted you, check with them or your tax advisor to understand if you need to take a distribution.  

Major changes in your life? If major changes have taken place in your life, review them with your wealth and tax advisors, as well as your other experts. A large inflow or outflow of assets, change in marital status, or addition of a new dependent could impact your tax planning and estate planning. These events can also introduce new opportunities to reduce your taxes or take advantage of tax-free/tax-deferred future growth. For example, welcoming a new child or grandchild may necessitate a conversation around starting a 529 plan education account, a custody account or a trust.  

If you have any year-end transactions you would like to make, we are here to help you. In addition, if you need funds for a major purchase, plan to travel for an extended period, or have questions regarding wealth planning for the coming year, please let us know. 

Important Disclosures

This material is provided for informational or educational purposes only and should not be construed as investment, accounting, tax or legal advice. Always consult a financial, tax and/or legal professional regarding your specific situation. This communication is not intended as a recommendation or as investment advice of any kind. It is not provided in a fiduciary capacity and may not be relied upon for or in connection with the making of investment decisions. Nothing herein constitutes or should be construed as an offering of advisory services or an offer to sell or a solicitation to buy any securities or a recommendation to invest in any specific investment strategy. Investing involves risk, including the possible loss of principal. Past performance is not indicative of future returns. The views expressed herein are as of a particular point in time and are subject to change without notice. The information and opinions presented herein are general in nature and have been obtained from, or are based on, sources believed by Klingenstein Fields Advisors (“KF Advisors’) to be reliable, but KF Advisors makes no representation as to their accuracy or completeness. Although the information provided is carefully reviewed, KF Advisors cannot be held responsible for any direct or incidental loss resulting from applying any of the information provided. KF Advisors represents two investment advisers registered with the Securities and Exchange Commission: Klingenstein, Fields & Co., L.P. and KF Group, LP. If you are a KF Advisors client, please remember that it remains your responsibility to advise KF Advisors, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services.