The holidays are in full swing, but before you bid 2021 goodbye there are a few (6 to be exact) things on your list that are essential for you to review, so grab some egg nog and a slice of fruit cake and let’s get started…
- Review tax withholdings: Review your tax withholdings and payments. Big events in the last year — such as marriage, divorce, or having a child — are good reasons to adjust your withholding.
Also, keep in mind the many big events over the last couple of years that might affect how much you should withhold. Did you qualify for coronavirus tax relief or a special tax law provision in light of a major disaster in your area? Or did you receive unemployment compensation or experience a job loss? Have you pivoted from being an employee to working in the gig economy due to the pandemic?
Check out the Tax Withholding Estimator (also available in Spanish) from the IRS. It’s a handy tool for everyone — employees, retirees, and the self-employed — who wants to effectively tailor how much income tax to withhold.
- Make Charitable Contributions: The Taxpayer Certainty and Disaster Tax Relief Act of 2020 provide provisions to encourage charitable giving. In 2021, if you are married you can take $300 per person as a deduction rather than just $300 as a combined “tax unit”.
- Spend Eligible Flex Dollars: A healthcare flexible spending account can save you money as long as you spend the money before the end of the year. Otherwise, you run the risk of losing it. (Note that some employers offer a 2.5-month grace period or allow you to carry over $550 into the next year).
- Review Insurances: The end of the year is a great time to review all insurance, not just health insurance. Check out your homeowner insurance and auto insurance as well. This is particularly important if your marital status has changed. Did you know you can save money bundling insurance with one company?
- Review Beneficiaries: Like changing the batteries in your smoke detector, the end of the year is a good time to review beneficiaries. Are the people designated on your bank accounts, trust, insurance policies, retirement accounts the people you still want to be designated? It is all too common, for example, to accidentally leave an ex-spouse on a policy you don’t review every year.
- Meet with your financial planner: The end of the year is a great time to review how your money did during the year and if you want to rebalance your portfolio going into the new year.
Go into the new year feeling accomplished with a refreshed plan!
