As September rolls around and school begins, no matter what age you are, it always feels like it is the beginning of a new year. It’s also a good time to review your finances and make any changes before the end of the year. Here are a few year-end things to consider:
• College Planning – Make sure to fund your 529 plan before year end. You can deduct up to $10,000 if married or $5,000 if single on your New York State tax return. Even if you will need the money to pay college tuition in January, you can fund the 529 plan, get the deduction, and then withdraw it to pay the tuition. Make sure you are funding the New York plan at NYSAVES.ORG. Go to NYSAVES.org to get started.
For those who have children in college or who will be starting college in 2019, you can complete the FAFSA forms beginning October 1st. If you looking for financial aid, schools often have limited resources so it’s best to get them done early.
• Retirement Plans – Are you fully funding your 401K, 403b and other work-related retirement plans? Review your current contributions to make sure you are getting the full benefit of the tax deduction and deferment that you can. In most cases you can fund $18,500 in 2018. If you are age 50 or older, you can add an additional $6,000 to your contributions.
• Tax Withholding – There has been much confusion regarding the new tax laws. With homeowners losing much of their property tax deductions starting this year, many may find that the lower tax rates are not having much of an impact. In fact, some taxpayers may actually have to pay more taxes than the prior year. Review your withholding and estimated taxes paid to date. If you need to make a change you can either pay an estimated tax payment or change your tax withholding. Now is a good time to review this with your accountant.
• Medicare Surcharge – If you are 65 or older and on Medicare, make sure to look at your income to see if you will be hit with higher Medicare Surcharges in the next year. IRMAA (Income Related Monthly Adjustment Amount) often is a big shock for many retirees each year. There are income limits that you should be aware of to help reduce this surcharge. Now is the time to look at your income and see how you can lessen the impact of IRMAA.
With tax deductions being reduced, now is the time to make sure you are taking full advantage of the available deductions you have. A “Back to School” review of the above areas can make sure your year-end planning goes smoothly!