7 Financial Tips for Closing Out 2020

7 Financial Tips for Closing Out 2020

By Solid Serenity Legal Solutions

2020 is quite the year. It will undoubtedly go down in the history books. And, if you’re like us, we’re sure you are ready to leave 2020 behind in your rearview.

But, in order to make sure your 2021 starts smoothly, here are 7 financial tips for closing out 2020.

(1) Look At Your Emergency Fund

If 2020 taught us anything, it’s expect the unexpected. Experts suggest having 3 to 6 months of your total monthly expenses saved into an emergency fund.

Check your fund to see if you used any money this year that needs to be replaced. Review your budget as well to see if you need to adjust any numbers for 2021.

(2) Maximize Retirement Savings

You have until April 15, 2021 to make your maximum allowed contributions to your IRA retirement accounts. But, 401(k) and 403(b) contributions are only deductible in the year they are made. 401(k) and 403(b) contribution limits are $19,500 for 2020, and IRA limits are $6,000.

(3) Use All Your Flex Spending Account Money

If you have a Flex Spending Account for health or dependent care expenses, you may lose the money at the end of the year if you don’t use it. Your employer might offer some flexibility to use the funds in the first quarter of 2021 or allow a small rollover, but most don’t.

(4) Give Out Your Annual Gifts

The gift tax exemption for an individual is $15,000 and $30,000 for a married couple in 2020. You can give up to that amount to as many people as you’d like without paying gift tax or having the total amount counted against your lifetime estate tax exemption.

(5) Give Money to Your Favorite Charities

Giving to charities can be a helpful tax tool. It may be beneficial to you to gift some assets that may have capital gains to charity instead of paying the taxes on them. Under the current tax code, you may need to donate a large amount to qualify for a deduction. Check with your trusted tax advisor.

(6) Sell Investments for a Loss

Many investments have taken a large loss this year. If you suffered losses in your taxable accounts, it may be beneficial for you to sell those investments to claim the loss this year. Individuals can deduct up to $1,500 of capital losses against their income, and married couples can deduct $3,000. Losses above the allowable amount are carried forward to the next year.

(7) Review Your Beneficiaries

This year has been bananas and we have all gone through a lot of changes. If the changes in your life were major- marriage, divorce, birth, or death- you need to review your beneficiaries and your estate plan. Book online with us today to review your plan.