Year-End Financial Checklist

Keeping your financial affairs in order leads to less life stress. Here is a checklist of year-end items that when completed, will make you feel more organized, allowing you to enjoy the holidays.

  • Understand your 2019 taxable position
  • Maximize company retirement plan contributions
  • Manage your current year taxable income
  • Plan the timing of your charitable gifts
  • Ensure you have taken all your IRA Required Minimum Distribution
  • Set your 2020 financial goals


Talk with the financial advisors at Lucas Capital Management and start the new year off with a plan.


Having an estimate of your current year income and deductions is an important place to start.

This does not need to be a full-blown detailed analysis, but just a rough estimate. Is your income higher, lower or about the same as 2018? Your financial advisor can give you an estimate of the income from your portfolio. Are there other assets that you sold during the year which generated a gain or loss? Another important aspect to understand is if you will take the standard deduction, or itemize deductions on your federal tax return. Recent tax law changes significantly increased the standard deduction so that even if you historically itemized, you may now be taking the standard deduction. The Joint Committee on Taxation estimated that the number of people who itemize deductions will fall from 46.5 million to 18 million under the new tax laws. Almost 90 percent of tax filers will take the standard deduction in 2019. Knowing your expected income and deductions in 2019 will guide decisions that you want to make before year end.

Maximize the amount you contribute to your company sponsored 401(k) plan.

If you are expecting a year-end bonus, consider allocating a portion of it to completely fund your 401(k) contributions. In 2019, you can contribute $19,000 to your 401(k) plan and $24,000 if you are over 50 years old. These contributions will reduce your current income taxes and better prepare you for retirement. Even if you don’t take full advantage of the top IRS limits, stretch yourself to contribute more than you do now.

Manage your taxable income based on your estimate of 2019.

In most cases, it’s beneficial to reduce current year income and defer it to next year; however, in certain circumstances, you might want to accelerate income into 2019. One lever at your disposal is to manage income through sales of securities in your portfolio. Gains and losses on securities that you still own are called “unrealized” and are not taxable. Tax does not become due until a security is sold and the gain or loss becomes “realized.” By selling securities in a loss position, you generate capital losses and alternatively, you generate capital gains by selling securities that have increased in price since you purchased them. For positions held over one year, capital gains and losses are considered long-term and have favorable tax treatment. Long-term gains are taxed at 0 percent, 15 percent or 20 percent rates, depending on your income. Short-term capital gains are taxed at the higher ordinary income rates.

If annual capital losses exceed capital gains, up to $3,000 can be used to reduce income on your federal return. Losses in excess of $3,000 can be carried forward to offset capital gains in future years. State taxes may not be as friendly to capital gains and losses as the IRS.

Your financial advisor will work with you on a plan for generating capital losses or gains from your portfolio prior to year-end. Recognize that selling a security for a loss does not mean that you need to permanently be out of the security. Thirty days after the sale, the security can be repurchased.

By strategically planning the timing of your charitable giving, you can make the most of the higher standard deduction.

For all practical purposes, mortgage interest, state and local taxes and charitable giving are the only remaining deductions allowed on your federal tax return. Medical care expenses are only deductible in excess of 7.5 percent of your income. State and local taxes are capped at $10,000, so to exceed the $24,400 standard deduction for married couples, your mortgage interest and charitable giving need to exceed $14,400. If, like many people, you fall in the range but don’t exceed the limit to itemize, consider bunching your charitable giving by making two donations in one year and skipping the next year. Alternatively, you could set aside multiple years charitable giving in one year by setting up a donor advised fund at Community Foundation of NJ.

The following is an example of the effectiveness of this strategy.

Tom and Sally normally contribute $7,000 per year to their church and other charities. They pay $15,000 in property tax and $4,000 annually in mortgage interest. Before 2018, they would always itemize their deductions, receiving full tax benefit from their charitable deductions. In 2018, they followed their same pattern of charitable giving, yet on their tax return, they were not able to itemize because the $24,000 standard deduction was greater than their itemized deductions of $21,000. As a new strategy, they are bunching their charitable giving in 2020 by writing checks on January 1, 2020 to their church and charities, then giving the same amount again at the end of 2020. In 2019, they will take the standard deduction of $24,400, which is far in excess of their allowed itemized deductions. Then in 2020, they will itemize because the $14,000 of charitable giving in 2020 will put them over the standard deduction. This bunching strategy turns what would be two years of non-deductible charitable giving into a tax deduction in 2020.

An extension of this strategy, if you have the available assets, is to set up a donor-advised fund and contribute five or more years of charitable giving in one year when you set up the fund. You can then parse these funds out over a period of time to provide annual support to your favorite charities. For more strategies see Charitable Giving: What you need to Know.

If you are over 70-½, make sure you take your Required Minimum Distribution (RMD) prior to year-end.

When an RMD is missed or mis-calculated, the IRS penalizes you by 50 percent. This is a significant penalty, so it’s worth double checking all of your IRA and 401(k) accounts to ensure that you have taken the RMD. Your financial advisor will keep track of accounts that you hold with him or her, but if you have others outside of the advisor, it’s up to you to calculate and take the RMD. For simplification, we always recommend consolidating multiple retirements accounts into a single IRA account to ease the burden of calculating and taking the annual RMD.

Year-end is also a good time to set your financial goals for 2020.

Make a quick list of the important financial goals that you know you need to do but didn’t get to in 2019. Is it to pay down debt? Make the first financial plan? Update your will and estate plan? You don’t need to act on them today, but write them down and start the process!

Spending a few hours in early December on a year-end checklist will lead to a happier, lower-stress holiday season because you know that your financial house is in order.