10 Ways to Finish 2010 on a Super Note

The New Year will bring new expenses, especially for parents caught up in the last minute rush to buy gifts. What can you do to start the New Year off right, financially speaking?

The New Year will bring new expenses, especially for parents caught up in the last minute rush to buy gifts. What can you do to start the New Year off right, financially speaking?
Here are 10 money moves to make by December 31st. They'll help you boost your wallet and maybe even your child's college savings. So, take a look...and act now!
<strong>1.   Check your investments</strong>
Chances are your investments are doing better than they were in the previous year. But that doesn't mean you don't have any "dogs" you should eliminate. If you have a dog of a stock or mutual fund, consider selling it by year-end. The losses you take can offset the gains you've realized on other stocks or funds and help reduce your tax bill. 
<strong>2.   Max-out on retirement accounts</strong>
Many companies have returned their 401(k) matching dollars after wiping them out due to the recession. But even if not, your 401(k) is still considered your top savings vehicle since money is set aside pre-tax and the investments grow on a tax-deferred basis (meaning, no taxes on earnings until you take out your money). Whether it's a 401(k) through an employer or your brokerage firm -- or even a 403(b) through a non-profit -- you'll want to fund it by year-end. The maximum contribution is $16,500 plus $5,500 for those 50 and older.
<strong>3.   Check your tax withholding</strong>
The new tax law means your take home pay next year may actually be higher, thanks to lower Social Security taxes. In fact, they'll be cut by as much of a third for most workers, from 6.2 percent to 4.2 percent. So, you'll want to make sure you're not having too much or too little withheld. Too much means Uncle Sam is earning interest on your money (though you'll get a refund) and too little means you'll have a tax bill.
While it's always a good idea to review your withholdings annually, the new changes make it even more so. You should also review your withholdings if you're an individual or couple with multiple jobs, are having children, getting married, getting divorced or buying a home, or are someone who typically winds up with a large refund at the end of the year.
<strong>4.   Deduct holiday expenses</strong>
Never thought it was possible? It is, if it's business related. Did you buy any holiday gifts for co-workers, vendors, or prospective customers or partners? Up to $25 per such gift is deductible. Also, how about the holiday party you gave that was primarily for business purposes? The food, band, and desserts are 50% deductible as a "meals and entertainment" expense, unless you make it a marketing expense (in which case, it's 100% deductible!). Just be sure to keep receipts, note the purpose, and maintain a list of who attended any event and the business relationship.
<strong>5.   Help a relative</strong>
I've written before about all the good grandparents or simply those who have some extra wealth can do, especially for your son or daughter trying to close the college-funding gap. Give the gift of education or something else worthwhile while you're alive and you will not only reduce your taxable estate, but you'll enjoy seeing it put to good use.
You may give up to $13,000 to someone if you're single (or $26,000 if married) without facing gift taxes. If you contribute to a 529 College Savings plan, however, you can "front-load" your gifting and give up to five times -- or $130,000 if you're a couple -- without facing a gift tax. Nice. You should also check out new programs launching in January by SuperFutures to help ensure parents' investment in college is used wisely. Go here to get notified.
<strong>6.   Donate to a charity</strong>
Tis the season to give, and if you've been one of the lucky ones who did better financially than you expected, maybe you're up for sharing more of it. You can give cash or stock to a charity - but what's better?
If the stock is worth more than you bought it for, you're usually better off donating it to charity instead of selling it - if you're going to donate, that is. That'll allow you to avoid the capital-gains taxes on the profit. If you've had the stock for at least a year, you'll also be able to deduct the fair market value of it on your taxes, so long as you itemize. Of course, donating money is always deductible so long as you itemize. And if you're donating your services, remember that only mileage - not your time - is deductible.
<strong>7.   Make an estimated tax payment early</strong>
If you didn't pay enough to the Fed last year, you may face an even bigger tax bill come April 15th. For instance, maybe you didn't have enough taxes withheld from your paycheck or you made a chunk of money on an investment. If you pay estimated taxes, consider paying by December 31st for a deduction this year.
<strong>8.   Pay January's mortgage in December</strong>
Similarly, making a mortgage payment early will increase your mortgage deduction for 2010. Perhaps all the talk about possibly eliminating this valuable deduction might spur you to move on this one.
<strong>9.   Enroll in your employer's "flexible spending account"</strong>
These accounts allow you to sock away up to $5,000 per family on a pre -tax basis, much like a 401(k), to cover out-of-pocket health care (e.g., band-aids and Lasik eye surgery) and child care expenses. Open enrollment is typically the only time to make changes to your plan and that's usually in November. However, you may be able to make changes so long as it's a Qualifying Life Event, such as a marriage or divorce, a new child, a change in your employment or you go on family medical leave. Even if no changes are needed, now is a great time to budget and plan what you need to set aside for the next year.
<strong>10.  Contribute to your IRA</strong>
Finally, while you have until April 15th to fund your IRA, whether a Roth or traditional, getting it done before then will just leave you with one less thing to worry about. At a minimum, you can get the paperwork done to open an account if you don't have one already. The max you can contribute is $5,000 and an additional $1,000 if you're 50 or older. And don't forget the unworking spouse - you can save for him or her, tooThe New Year will bring new expenses, especially for parents caught up in the last minute rush to buy gifts. What can you do to start the New Year off right, financially speaking?

Here are 10 money moves to make by December 31st. They'll help you boost your wallet and maybe even your child's college savings. So, take a look...and act now!

1.   Check your investments

Chances are your investments are doing better than they were in the previous year. But that doesn't mean you don't have any "dogs" you should eliminate. If you have a dog of a stock or mutual fund, consider selling it by year-end. The losses you take can offset the gains you've realized on other stocks or funds and help reduce your tax bill. 

2.   Max-out on retirement accounts

Many companies have returned their 401(k) matching dollars after wiping them out due to the recession. But even if not, your 401(k) is still considered your top savings vehicle since money is set aside pre-tax and the investments grow on a tax-deferred basis (meaning, no taxes on earnings until you take out your money). Whether it's a 401(k) through an employer or your brokerage firm -- or even a 403(b) through a non-profit -- you'll want to fund it by year-end. The maximum contribution is $16,500 plus $5,500 for those 50 and older.

3.   Check your tax withholding

The new tax law means your take home pay next year may actually be higher, thanks to lower Social Security taxes. In fact, they'll be cut by as much of a third for most workers, from 6.2 percent to 4.2 percent. So, you'll want to make sure you're not having too much or too little withheld. Too much means Uncle Sam is earning interest on your money (though you'll get a refund) and too little means you'll have a tax bill.

While it's always a good idea to review your withholdings annually, the new changes make it even more so. You should also review your withholdings if you're an individual or couple with multiple jobs, are having children, getting married, getting divorced or buying a home, or are someone who typically winds up with a large refund at the end of the year.

4.   Deduct holiday expenses

Never thought it was possible? It is, if it's business related. Did you buy any holiday gifts for co-workers, vendors, or prospective customers or partners? Up to $25 per such gift is deductible. Also, how about the holiday party you gave that was primarily for business purposes? The food, band, and desserts are 50% deductible as a "meals and entertainment" expense, unless you make it a marketing expense (in which case, it's 100% deductible!). Just be sure to keep receipts, note the purpose, and maintain a list of who attended any event and the business relationship.

5.   Help a relative

I've written before about all the good grandparents or simply those who have some extra wealth can do, especially for your son or daughter trying to close the college-funding gap. Give the gift of education or something else worthwhile while you're alive and you will not only reduce your taxable estate, but you'll enjoy seeing it put to good use.

You may give up to $13,000 to someone if you're single (or $26,000 if married) without facing gift taxes. If you contribute to a 529 College Savings plan, however, you can "front-load" your gifting and give up to five times -- or $130,000 if you're a couple -- without facing a gift tax. Nice. You should also check out new programs launching in January by SuperFutures to help ensure parents' investment in college is used wisely. Go here to get notified.

6.   Donate to a charity

Tis the season to give, and if you've been one of the lucky ones who did better financially than you expected, maybe you're up for sharing more of it. You can give cash or stock to a charity - but what's better?

If the stock is worth more than you bought it for, you're usually better off donating it to charity instead of selling it - if you're going to donate, that is. That'll allow you to avoid the capital-gains taxes on the profit. If you've had the stock for at least a year, you'll also be able to deduct the fair market value of it on your taxes, so long as you itemize. Of course, donating money is always deductible so long as you itemize. And if you're donating your services, remember that only mileage - not your time - is deductible.

7.   Make an estimated tax payment early

If you didn't pay enough to the Fed last year, you may face an even bigger tax bill come April 15th. For instance, maybe you didn't have enough taxes withheld from your paycheck or you made a chunk of money on an investment. If you pay estimated taxes, consider paying by December 31st for a deduction this year.

8.   Pay January's mortgage in December

Similarly, making a mortgage payment early will increase your mortgage deduction for 2010. Perhaps all the talk about possibly eliminating this valuable deduction might spur you to move on this one.

9.   Enroll in your employer's "flexible spending account"

These accounts allow you to sock away up to $5,000 per family on a pre -tax basis, much like a 401(k), to cover out-of-pocket health care (e.g., band-aids and Lasik eye surgery) and child care expenses. Open enrollment is typically the only time to make changes to your plan and that's usually in November. However, you may be able to make changes so long as it's a Qualifying Life Event, such as a marriage or divorce, a new child, a change in your employment or you go on family medical leave. Even if no changes are needed, now is a great time to budget and plan what you need to set aside for the next year.

10.  Contribute to your IRA

Finally, while you have until April 15th to fund your IRA, whether a Roth or traditional, getting it done before then will just leave you with one less thing to worry about. At a minimum, you can get the paperwork done to open an account if you don't have one already. The max you can contribute is $5,000 and an additional $1,000 if you're 50 or older. And don't forget the unworking spouse - you can save for him or her, too.

Jennifer Openshaw

CEO & Founder, SuperFutures

Author, The Millionaire Zone

Find me on Facebook and Twitter @superfutures

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