Residential Energy Efficiency Tax Credit

If you are considering an energy saving update to your home, you may want to do it before the end of the year to benefit from a $500 tax credit. This credit expires on December 31, 2016.  Be aware that a homeowner can only claim a maximum of $500 between 2011 and 2016.

This means that if you have already claimed this $500, you’d be “ineligible for a tax credit.” This is a great way to improve the value of your home, save some money and make the world a better place.

For more info on the energy credit click: U.S. Dept of Energy

Use Form 5695 to figure and take your residential energy credits.

Click Here for Form 5695

Please Note  that the residential energy credits are:

  • The nonbusiness energy property credit, and
  • The residential energy efficient property credit

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Don’t Leave Money on the Table:

I recently met with a family for a financial planning consult. When I reviewed the wife’s work benefits, I noticed that she had been eligible for a 5% company match to her 401K for the past three years. Let’s say she was making 50K, after three years she had just given up $7,500. Meaning that her company was willing to put $2,500 in her 401K for each year she put in $2,500 into her 401K, (5% of 50K is $2,500).

This financial task seems like a no brainer. It’s like giving up “free money”. To be fair it may not be an easy task for a family to remove this full amount of income from their budget. In that event, it still pays to at least put something away! In this example, if she would have put away $100 a month, her savings would amount to $1200 for the year, then her company would be able to place an additional $1200 into her retirement account and after three years without the impact of the investments, she would have had $7200 in her account.

I would recommend to start by putting away whatever you think you can afford. It’s a good idea to seek guidance from a professional like a financial advisor or accountant. In sum, check with HR to see if your company has a 401K match before the year ends!


Retirement Contributions

Although, Roth IRA contributions of $5,500 can be made until April of next year, it’s a good idea to take action today. A family filing jointly with an income of up to 194,000 may each contribute $5,500 toward a Roth IRA account. I am a big fan of this type of account. The funds grow tax free. This is the only type of retirement account where funds are NOT taxed when they are taken out after age 59 ½ and there is no RMD, required minimum distribution.

Also, don’t forget to take advantage of 401K/403b/457 retirement contributions before the deadline,  December 31, 2016. (unlike Roth IRA funds contributions cannot be made thru April 2017)  In 2016 the contribution limit is $18,000 for eligible employees and company matched funds do not count toward this limit.  If you are over 50, there is an additional $6000 called a catch-up to help those getting closer to retirement sock away a little more. Again, put away whatever you can. Between regular contributions and the power of compounding (beyond the scope of this article), the money adds up. Save something and save early.


Change Your Passwords:

Hackers are clearly very good at their jobs. Let’s not make their job easier. We should all be changing our passwords regularly. At the very least consider changing your credit card, brokerage, banking accounts and other sensitive accounts once a year.

Having a hard copy of the passwords may make sense but remember to keep it in a safe and fireproof environment like a lockbox. (It is a good idea to let someone you trust like a spouse, parent or sibling know where the list of accounts and passwords is kept, in the event they need to help you during an emergency or death.)

Another option is to use an online password management tool. Although this sounds counterintuitive for someone trying to protect their password and accounts, these password tools may be something to consider. The tool uses a really difficult and individual password for each of your accounts. In order to login you need only one password to enter the password tool. Then it signs you in.  For more info on Password Management Tools:

Comprehensive review of Password Managers done by PC-Magazine click here

Tech Radar’s Best Password Manager 2016 click here

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Health Savings Accounts:

If you have a High Deductible Health Plan (HDHP), you are eligible for a Health Savings Account(HSA). The IRS defines a high deductible health plan as any plan with a deductible of at least $1,300 for an individual and $2,600 for a family. If you fit this criteria then you can start a HAS via your employer (if they have one), bank or financial institution.

An HSA allows you to place money in this account before having taxes taken out where the money can grow tax free and can be taken out tax free. The purpose of this account is to help pay for medical expenses- except the actual premium. The reason why you want to make this move before the end of the year is that these contributions reduce your taxable income so if for example you earn 40K and put 3K into a HSA you only pay tax on 37K. Also, unlike Flexible Spending Accounts that need to have funds spent before the end of the year, HAS money can rollover into the next year without penalty. For more info on HSA’s:

Click here for Govt. Info about a High Deductible Health Plan (HDHP)

Forbes Article on 5 Health Savings Accounts Mistakes 

BankRate Article on How to Choose HSA Accounts

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#6. Flexible Spending Account—Use It or Lose It!

A Flexible Spending Account (FSA) may be offered by your employer as a benefit to set some money aside (2016 limit of $2,550) pre-tax in a special account to be used for paying health-related expenses. The employee benefits by paying less tax and has more money to spend.

So, for example, if John Smith was to earn $40,000 that year, in a 25 percent tax bracket, and decides to set aside $2,000 into a FSA, John would now only need to pay taxes on 38K (40K-2K) and would have more money to spend on health care; $2,000 instead of $1,500 if he would have been taxed on the 2K. ($2000 taxed at 25 percent =$1,500)

There is some risk involved in this account, in that you can lose your money if you don’t spend down all the funds set aside. To combat this concern, employers have been adding one of two provisions to alleviate the pressure. One option allows the employee to roll over $500 into next year’s account (without impacting next year’s contribution limits). The second option offers an extended deadline for 2 ½ months—until the middle of March, allowing the employee more time to spend the money in their Flexible Spending Account.

Click here for a list of dependent care eligible for FSA
Click here for a no hassle FSA Store
Download PDF of Over the Counter FSA Approved items


# 7. Sell losses to offset gains.

When an investor realizes he may have a big capital gain for a given year that will trigger a sizable tax bill, this investor may consider what is called harvesting tax losses. Meaning, if you also notice an investment that is doing poorly (below what you paid for it) and decide to sell it for the right reason, the investor can use the losses of the poorly performing investment to offset his capital gain liability.

Although at first glance it may be beneficial for an individual to utilize this approach, it’s not recommended to sell a stock just to use the loss as a tax break. It also goes without saying that it is recommended to seek the advice of a financial or tax professional to determine if this strategy makes sense for you and how you can benefit properly from exercising this strategy.

Click here for a comprehensive explanation – regular dude language (full disclosure: We keep our client’s money at Schwab and use their services to benefit our clients.)
Click here for a comprehensive explanation – more details for finance professional 



Request a credit report.

There is no such thing as a free lunch. But there is such a thing as getting a free credit report once every 12 months. You can request a free report from each of the nationwide credit reporting companies, Experian, Equifax and TransUnion.

Reviewing your credit report is a way of practicing good financial hygiene. I would recommend looking over these reports once a year. You can set an annual Google or Outlook calendar reminder to request a copy of your report.

You should be looking for errors, inconsistencies between the agencies and irregularities such as accounts you don’t know about or loans you never requested. In fact, there are some organized individuals who make a request from one agency every four months to spot any glaring issues more immediately!

Make a will

I wouldn’t ordinarily suggest someone take the “do-it-yourself” approach when it comes to estate planning, but for someone who currently has a simple estate, a state-specific online service can generate a rudimentary plan that may be better than nothing. An AARP survey revealed that 40 percent of “Americans over the age of 45 don’t have a will.” This statistic is shocking and troubling. If you, your friends or loved ones don’t have a will, please get on their case! This type of friend or family pestering is what I consider selfless and is called positive nudging.

This document is too important to be overlooked or caught in the procrastination muck that can plague pre-retirement Americans. You don’t need a lawyer to at least temporarily prepare a will. You may choose to find an online will service, estate planning software, materials at a bookstore or library. Seeking legal advice is always recommended. Professionals get paid to know how to set up a will while considering the state’s requirements and your personal needs.

Review benefits you should be receiving from your employer

Health insurance and pension plans are usually the services individuals associate with an HR office. But you may be surprised to learn that there can be other services and opportunities available to help you save money. For example, there is a health insurance company that offers a free Fitbit to their policyholders and provides incentives such as Amazon dollars for meeting daily step goals. Some companies offer neat perks such as free gym access, free local museum passes or discounts for products or services.

So when the HR office runs a benefits meeting, try to attend, get the handouts or follow up with someone from HR to learn about the company’s general benefit offerings—health, pension and disability insurance. It may also help to meet with a financial adviser beforehand to discuss ways to utilize your employee benefits to the maximum.


To Be Published December 16, 2016

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