The end of the year always feels a little hectic. With the holidays and potential family obligations, plus trying to wrap up client work and beginning to look ahead to 2016, it can be hard to focus on finishing out 2015 strong.
Below are some financial moves to think about before you close your books for the end of the year:
1. Apply for health insurance
Whether or not you’ve applied for health insurance through a health care exchange in the past, 2016 is the year to start. Each year, the tax penalties for not having health insurance, either individually or through an employer, are getting more and more steep.
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In 2016, the penalty is 2.5% of your household income up to the cost of a bronze plan or $695 per person up to $2,085, whichever is higher.
Basically, this means you may as well get at least a bronze level plan of coverage (can be found for about $200 per month) since you can pay up to that much in penalties.
Also, if you make under a certain amount of income, you might be able to get some or all of your premium subsidized, known as a premium tax credit.
How to apply:
To apply, start at healthcare.gov to see whether your state has its own healthcare exchange or uses the federal government’s site. The healthcare exchanges are where you’ll find plans available to you and also where you can find out if you’re eligible for a premium tax credit.
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It can take some time to shop around and get familiar with the terms of each plan so plan to spend at least an hour on the health care exchange.
The last day to apply for coverage during the open enrollment period is January 31st, 2016.
How to choose:
Purchasing insurance is about deciding how much financial risk you want to take on yourself vs. how much risk you want to offload to the insurance company. Higher deductible plans are less expensive because you’ve decided to take on more of the risk financially.
It’s going to be hard to predict, but in general, if you only see the doctor for routine checkups, you might want to consider taking on a high deductible plan.
On the flip side, if you see the doctor or a mental health professional regularly, it might be worthwhile to pay a higher monthly premium for a lower deductible.
One of the most difficult aspects of being a freelancer is that your income situation can change on a daily basis. (Read more here about creating more steady income!)
Turns out this is an advantage when it comes to paying for health insurance.
If you suddenly lose a big gig or your income takes a big dip for a few months, you can actually re-apply for health insurance under the special enrollment period and potentially qualify for a bigger premium tax credit to help you out in the lean months.
If you find yourself in this situation in the middle of 2016, call your state health exchange or healthcare.gov for details on how to go through the special enrollment process.
2. Book a doctor’s appointment
If you do have health insurance this year, then due to the Affordable Care Act, all preventative care doctor visits (this includes gynecology visits for women) are no additional charge with all insurance plans.
You get one “free” visit every year and this is use it or lose it. So if haven’t seen the doctor yet this year, book something soon!
If you don’t know where to find a doctor, start with zocdoc.com. The best part about ZocDoc is that you can filter by insurance carrier, right down to the exact name of the plan so you never have to wonder if the doctor takes your insurance.
The second best part is you can see who has availability in the next week so you don’t end up calling 10 doctors only to find they have 2 month waiting lists.
And finally, the doctors are reviewed by patients on Zocdoc so you can make sure your potential doctor has good bedside manner.
3. Donate to charity
Consider donating your old clothes and home goods to thrift stores (get a receipt) or making end of year donations to your favorite charities.
You can make up to $5,000 in non-cash contributions without needing an appraisal, so take advantage of this big deduction this year and declutter your home at the same time.
December 31st is the absolute last day you can make charitable contributions and write them off for 2015. This includes cash and non-cash donations.
4. Plan IRA contributions for 2015
You technically have until April 15, 2016, to make contributions to an IRA for 2015, but now is the time to see if you have the money or can put together the money to make the contribution.
If you’re trying to save money on taxes this year, consider making a pre-tax contribution to a traditional IRA (max contribution is $5,500) or a SEP IRA (max contribution is 25% of earned income or $53,000).
If you want to have some flexibility with your retirement contributions and made under $116,000 this year, consider contributing to a Roth IRA.
All your contributions are with after-tax dollars, so you don’t get the tax deduction up front, but you don’t have to pay taxes on the growth when you take out the money at age 59 1/2.
Another great benefit with a Roth IRA is that you don’t pay any penalties for taking out any dollar you put in. This means if you put in $1,000, you can take the money out of the Roth at anytime (although the goal is to leave it in there as long as possible!).
5. Reach out to your accountant
Get a head start on speaking with your accountant about what you need to have prepared to file your 2015 taxes and get them out of the way as soon as possible.
Your accountant will not only be happy to hear from you this early, but will have more time to spend on your tax situation at the beginning of 2016, before the tax season rush hits.
You can ask your accountant questions like:
- Would it make sense to incorporate in 2016 (if you made over $100,000 in 2015 and see further growth)?
- How much should I contribute to an IRA this year? Should it be traditional, SEP, or Roth for tax purposes?
- What kinds of things can I deduct this year? What travel or trips can I justify writing off?
- Do I need to make additional estimated tax payments by January 15th based on my 2015 income?
- Is there anything I can do for 2016 that will help maximize my tax situation?
6. Set income goals for 2016
I don’t know about you, but 2015 was quite the blur for me. What really kept me grounded, though, was having income goals set for each month.
This way, I could always go back to the numbers if I felt like I was having a particularly crazy month or it felt too quiet for some reason.
One of the last things I recommend you do for 2015 is to look ahead to 2016 and create 12-month cash flow projections.
Plot out what you expect your income to look like for the next year and set some goals for stretching yourself and your work so you see measurable growth in 2016.
Once you’ve put together your cash flow projections, use this as your way to track your income next year and make sure you hit your goals on a monthly basis.
This is the number one way to truly focus on consistent growth each and every year.
Is there anything else you like to think about before the end of the year to make it feel complete? Share them in the comments below!
Hope you and your loved ones have a very happy holidays and safe and wonderful new year!
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