James C. Kelly is a wealth strategist at PNC Wealth Management.
It’s hard to believe, but the year is winding down. Before you know it, the holidays will be over and everyone may be making – and hopefully sticking to – New Year’s resolutions. “In between wrapping presents and attending holiday parties, there are financial strategies to employ to help you start off next year on the best foot financially,” said James C. Kelly, wealth strategist at PNC Wealth Management®. Kelly outlined year-end planning strategies that everyone can benefit from – regardless of age or financial status.
1. Review your estate plan and beneficiary designations.
Regardless of your age or how much you have in your bank account, it’s important to create and regularly review your estate plan with your legal advisors. Your estate plan dictates what will happen to your possessions, finances and dependents after you pass away. Things may have changed over the past year, and you should ensure your plan reflects your current lifestyle and family situation. “When reviewing your estate plan, you want to review who is included and whether the plan reflects recent life changes,” Kelly explained. “If you have children, it’s important to designate who will care for them if you aren’t around.” Your estate plan may also include things like standby guardianship and power holders (for example, financial and medical power of attorney). You should review these considerations with your legal advisors
2. Check your tax withholding.
Even though you won’t file your taxes until next year, if you wait until then to make adjustments, it’ll be too late to impact your 2018 taxes. Be sure to direct any tax questions to a tax advisor. “One of the country’s most comprehensive tax reform packages went into effect at the beginning of this year,” Kelly said. “You want to make sure that you’re aware of your tax obligations and current withholdings before Dec. 31, so you don’t have any surprises come filing season.” The IRS offers an online withholding calculator.
3. Tap into unused benefits.
Many employers’ health insurance plans include benefits such as flex spending accounts (FSAs) or health savings accounts (HSAs). If your employer offers an FSA, you may need to spend that money before the end of the year – or lose it forever. Qualifying households can allocate up to $5,000 per year for dependent-care services and $2,650 per year for medical expenses. If you have an HSA, you have until year-end to max out your contributions: $6,900 per year for those under 55 per household, and $7,900 per year for Americans 55 and older per household.
4. Check your credit report.
Everyone gets one free credit report every 12 months from each of the three major credit bureaus at www.annualcreditreport.com. Consider checking one report every four months to help you catch any fraud sooner rather than later.
“Take advantage of your free credit report so you’re aware of your financial status and also to make sure nothing unusual or fraudulent occurred over the past 12 months,” Kelly said. “Once you get your free credit report, I recommend saving it and keeping a hard copy. You never know when you’re going to need it.” If you notice any suspicious activity, contact the reporting bureau.
5. Max out your 401(k) plan
Hopefully you’ve been contributing enough to your 401(k) plan to at least receive a company match if your employer offers one, but are you taking full advantage of the tax-advantaged retirement savings vehicle? Individuals under age 50 can max out their 401(k) plan by contributing $18,500 per year, and those age 50 and older can put an extra $6,000 into their 401(k) plan per year.
“A 401(k) is a great tool to help save for retirement,” Kelly noted. “If you’re able to contribute more – or even better, max out your contributions – you have until the end of the year to do so.” Certainly the end of the year can be a busy time, but your future self will thank you for taking advantage of these year-end planning strategies!
Kelly also advised that if you’re 70 ½ or older you should make sure to take your required minimum distribution from your IRA before the end of the year.
If we can be of any assistance with your year-end tax strategy, feel free to reach out at any time.
Warm weather, blue waves, Cuban food and Disney World – do you really need more reasons than that to move to Florida? If the Wizarding World of Harry Potter and manatees don't do it for you, maybe the lax income taxes and plentiful credits will. If you're a little less easily persuaded – or maybe just really fiscally responsible – you'll be happy to know that in Florida, the sun shines on plenty of tax perks.
In terms of taxes, one of the key benefits of moving to Florida is what isn't there – namely, state income taxes. Alongside just six other states in the U.S., Florida does not impose income tax. The law is written in the state constitution, making it highly unlikely to change, and even better, that constitution prohibits municipalities and counties from levying personal income tax too.
Similarly, via its 2001 Economic Growth and Tax Relief Reconciliation Act, the Sunshine State does not impose a state death tax or a state-level estate tax. In response to conservative tax reform passed in late 2017 that limits tax deductions for many earners, among other measures, Florida Governor Rick Scott told the New York Post, "I want to personally welcome anyone escaping high tax states to join the hundreds of thousands of their former neighbors who have already moved to Florida."
Florida Tax Benefits: Personal
The tax advantages of living in Florida don't end at the lack of state income tax; many perks come in the form of personal tax breaks. If you own a home in Florida, the Save Our Home Act provides a homestead exemption, protecting the first $50,000 of your home's taxable value from taxation (except for school district taxes, which only have a $25,000 exemption – but it's for a good cause).
When it's time for your kids to hit the books, don't sweat the taxes. Every August, Florida hosts a tax-free weekend for school supplies that cost up to $60. Don't forget the other summertime tax holiday, which removes taxes on preparedness items like portable lights, radios, first-aid kits, generators and batteries.
Florida Tax Benefits: Business
Like its actual climate, Florida's tax climate is extremely welcoming to businesses. Here's just a sampling of the business-related taxes you won't have to pay in the Florida: corporate income tax on limited partnerships or subchapter S-corporations, corporate franchise tax on capital stock, property tax on business inventories or goods-in-transit (for up to 180 days on the latter), sales tax on the purchase of raw materials for use in a product intended for resale or sales or use tax on the co-generation of electricity.
As a state all too familiar with rising sea levels, Florida also offers a bevy of environmentally minded exemptions. These include exemptions for the use of electricity or steam used in manufacturing, natural gases used to generate electricity and solar energy systems.
With all the tax advantages of relocating to the Sunshine State, it makes sense consider that second or permanent home in a State that offers incentives. Whether you're ready to move, or considering a change in your life, reach out to us, we can help.
By Dan Ketchum
Live Naples Luxury
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