10 money actions earlier than the tip of the 12 months

I spent $ 25 today on my new 2021 monthly planner. For me this is a clear signal of optimism. I look forward to the next steps.

Perhaps you’ve done the same and started writing down what’s in the books for the year ahead.

The glimmers of hope for 2021 flicker at dusk.

Before you put your dog-eared calendar aside for 2020, however, there are a few things to keep in mind when it comes to your financial health and wealth. Here are 10 steps before the end of the year.

Review your retirement accounts and investment portfolio. Last night, our financial advisor enclosed my husband and me with an email with our annual review. She wrote: “Let me know if you would like to schedule a time to think about it. I hope you both stay safe and sound! “

We do it. We have set up a meeting later this week. And so far we are in good shape.

It’s been a year of market unpredictability from rising highs to lows of lows. And you did it. Now is a good time to take a look under the hood. You can do this together with your financial advisor over a phone call like us or through a virtual screen chat.

Let the “test your courage” do the talking. See if you might be reorienting yourself to prepare for the potential volatility of the next year, whether it might make you feel uncomfortable, or if you are nearing retirement. Remember that a diversified portfolio with a mix of stocks and fixed income investments that is tailored to your risk tolerance can go a long way toward balancing yourself out and calming down when the market fluctuates.

Reduce taxes on stock profits in 2020. If you sold investments that made profits during the year, you pay tax on those profits. To reduce the tax impact, you might consider selling other assets that have fallen in value, provided you don’t want to hold onto them for a possible rebound.

Take into account possible changes in tax law. If you have concerns about higher tax rates in the coming year, there are a few other steps you should consider. President-elect Biden’s campaign promise was not to raise taxes for those earning less than $ 400,000. However, if your income exceeds this amount and you are flexible about when the income will come in, consider whether you want to accelerate income this year by, for example, exercising stock options or receiving a scheduled bonus before the end of the year.

Assess your estate planning. This one isn’t easy to turn on a dime but it could definitely get you thinking. There is some debate that inheritance tax exemptions could decrease in the new administration.

If you die, your estate will usually not be subject to federal estate tax if the value of your estate is less than the exemption amount. For people who die in 2021, the exemption amount is $ 11.7 million ($ 11.58 million for 2020). For a married couple, that translates to a combined exemption of $ 23.4 million.

President-elect Biden has proposed that estate tax levels be reset to “historic norms”. This could mean reducing the inheritance tax exemption amount to $ 3.5 million ($ 7 million per couple), the gift tax exemption amount to $ 1 million ($ 2 million per couple), and the highest gift and estate tax rate could be increased from 40% to 45%.

You can ask your advisor if you should give gifts or set up trusts for children.

Use the donation for charity. You may be able to claim charity for 2020 if you have write-offs in excess of the standard deduction ($ 12,400 for singles; $ 24,800 for married couples filing together).

Under the CARES Act, which is part of the federal government’s March pandemic relief program, individual taxpayers listing in 2020 can make cash donations to certain qualified charities of up to 100% of their adjusted gross income of $ 60 % pull it off .

Taxpayers can also deduct up to $ 300 on cash donations in 2020 when filing their tax return in the spring, even if you don’t include it on your income tax return. The deduction is made “above the line” and reduces your Adjusted Gross Income by up to $ 300.

To qualify for the deduction, the donation must be made in cash – a check or credit card donation is okay. Contribution must be made to a qualified non-profit organization as defined in 501 (c) (3). The IRS offers a search tool to see if your donation is tax deductible.

If you bet that your income tax will rise in the next year, then you could push charity donations through 2021 so you can get the most benefit from the deduction. A great way to do this is to set up a donor-recommended fund for your philanthropic donation to give you time to make certain gifting decisions.

For more information on the rules and limits for collecting charitable donations, visit irs.gov.

Consider increasing unreimbursed medical expenses. In 2020, you can deduct non-reimbursed medical expenses that exceed 7.5% of your adjusted gross income. There is still some time to plan appointments and procedures that will increase the amount of your deductible expenses.

The IRS allows you to deduct payments for insurance premiums that you paid for medical care policies or for qualified long-term care insurance, dental and vision care as qualified medical expenses. Payments for false teeth, reading or prescription glasses, contact lenses, hearing aids and crutches are also deductible. The IRS allows you to deduct the costs you pay for medical care, such as medical expenses. B. Kilometers for your car, bus fare and parking fees.

Maximize your health savings account (HSA), if you have one. Health savings accounts allow you to set aside money for future qualified health expenses tax-free if you have a high deductible health insurance plan. Distributions for qualified health expenditure are also tax-free.

For 2020, the maximum HSA contribution for individuals is $ 3,550 and for family insurance is $ 7,100. Those 55 and over can contribute an additional $ 1,000.

Check your Tax-Exempt Healthcare Flexible Expenditure (FSA) account if you have one. Unlike an HSA, most FSAs “use it or lose it”. This means that all funds pending after December 31st will be forfeited. So tap the money to pay for medical expenses like glasses, contacts, or even hearing aids.

If you are self-employed, consider creating a Solo 401 (k) plan. In order to make contributions for 2020, you must create the plan by December 31st.

Create a spending budget for 2021. When it comes to future financial stability, spending is the easiest step to get a grip on.

Write down your regular fixed expenses such as mortgage or rental costs, health insurance premiums, utilities, etc. Your 2020 expenses can provide a guide. You may even notice some expenses from this year to trim back.

Then, review the expenses that are only for 2021, maybe a wedding favors or two, a remodeling project, education expenses, or, gasp, a vacation when it’s safe to hit the road.

St. Barts, you are on my mind.

Kerry Hannon is a leading professional and strategist in work and career, entrepreneurship, personal finance, and retirement. Kerry is the author of more than a dozen books, including Great Pajama Jobs: Your Complete Guide to Working From Home, Never Too Old to Get Rich: The Entrepreneur’s Guide to Mid-Life Business, Great Jobs for everyone over 50 and money trust. Follow her on Twitter @kerryhannon.