Your 2018 Financial To-do List

By Dave Rao
Friday, January 12, 2018

Dave Rao

What financial, business or life priorities do you need to address for 2018? Now is a good time to think about the investing, saving or budgeting methods you could employ toward specific objectives, from building your retirement fund to lowering your taxes. Here are a few options that might prove convenient.

Contribute more to your retirement plans. In 2018, the contribution limit for a Roth or traditional IRA remains at $5,500 ($6,500 for those making catch-up contributions). Your modified adjusted gross income (MAGI) may affect how much you can put into a Roth IRA: Singles and heads of household with MAGI above $135,000 and joint filers with MAGI above $199,000 cannot make 2018 Roth contributions.

For tax year 2018, you can contribute up to $18,500 to any kind of 401(k), 403(b) or 457 plan, with a $6,000 catch-up contribution allowed if you are age 50 or older. If you are self-employed, you may want to look into whether you can establish and fund a Solo 401(k) before the end of 2018; as employer contributions may also be made to Solo 401(k)s, you may direct up to $55,000 into one of those plans.

Make a charitable gift. You can claim the deduction on your 2018 return, provided you itemize your deductions with Schedule A. The paper trail is important here.

Can you take a home office deduction? If your income is high and you find yourself in one of the upper tax brackets, look into this. If you qualify for this tax break, part of your rent, insurance, utilities and repairs may be deductible.

Consider an HSA. If you are enrolled in a high-deductible health plan, you may set up and fund a Health Savings Account in 2018. HSA assets grow tax deferred, and withdrawals from these accounts are tax free if used to pay for qualified healthcare expenses.

Practice tax-loss harvesting. By selling underperforming stocks in your portfolio, you could record at least $3,000 in capital losses. In fact, you may use this tactic to offset all of your total capital gains for a given tax year.

Pay attention to asset location. Tax-efficient asset location is an ignored fundamental of investing. Broadly speaking, your least tax-efficient securities should go in pre-tax accounts, and your most tax-efficient securities should be held in taxable accounts.

Review your withholding status for the following:

  • Large discrepancies in refunds or payments each year
  • Recently married or divorced
  • Family member recently passed away
  • Significant change in earnings
  • You started a business venture or became self-employed

Is your marital status changing? If so, review the beneficiaries of assets, retirement accounts and insurance coverage.

Consider the tax impact of any upcoming transactions. Are you planning to sell (or buy) real estate next year? How about a business? Do you think you might exercise a stock option in the coming months? Might any large commissions or bonuses come your way in 2018? Do you anticipate selling an investment that is held outside of a tax-deferred account?

Should you make 13 mortgage payments in 2018? If your house is underwater, this makes no sense, and you could argue that those dollars might be better invested or put in your emergency fund. Those factors aside, however, there may be some merit to making a January 2019 mortgage payment in December 2018. If you have a fixed-rate loan, a lump-sum payment can reduce the principal and the total interest paid on it by that much more.

Talk with a qualified financial or tax professional today. Vow to focus on being healthy and wealthy in 2018.


Our firm does not render legal or tax advice. This article was written for our firm and provided courtesy of Marketing Pro Inc. Investments in securities and insurance products are NOT FDIC-INSURED/NOT BANK-GUARANTEED/MAY LOSE VALUE. Rao Wealth Partners is an independent firm with securities offered through Summit Brokerage Services Inc., member FINRA and SIPC. Advisory services are offered through Summit Financial Group Inc., a registered investment adviser. Summit is an independent broker-dealer with client assets held at First Clearing LLC (a wholly owned Wells Fargo subsidiary). Summit and its affiliates are under separate ownership from any other named entity.