Fourth Quarter Planning

Updating your financial plan for the fourth quarter can be a game changer for your business or personal finances. The fourth quarter is a good time to check on your financial reports and earnings. It’s also a great time to get all of your ducks in a row with regards to charitable donations, business purchases, and those all-important required minimum distributions. 

Charitable Donations

Donating to charity is a worthwhile and noble cause for your money. But business owners should be aware of the limits, rules and regulations surrounding charity donations. 

For example, there are two routes of donation: individual and corporate. Those who donate individually may do so up to the $300 limit and receive the deductions on taxes.

Alongside this, you might be entitled to make Qualified Charitable Distributions (QCDs) towards satisfying the Required Minimum Distributions (RMDs) of your Individual Retirement Account (IRA). This excludes the amount donated from your taxable income, but only those aged 70.5 + are eligible. The maximum limit for QCDs is $100,000, with a deadline of December 31st. 

You are allowed to donate from a private company account, to which deductible benefits also apply. Cash contributions made during the calendar year are eligible for a 25% tax deduction. Prior to donating, you should ensure that the charities are registered and qualified as per IRS regulations. 

Business Purchases

The fourth quarter can be the best time to make those all-important business purchases that you’ve been putting off all year. We are referring to the machinery, tech, and office equipment that is listed in your financial reports, for example.

We know, investing in your business can be risky and difficult to commit to. But spending during the fourth quarter could be a strategy for tax efficiency in your business. 

You can work with a CFP and an accountant to figure out if the tax benefit of full deductions or depreciation is better for your financial situation. It’ll likely be different from year-to-year too, depending on your profit and loss statements. 

Required Minimum Distributions

Finally, RMDs must be taken from your traditional IRA after you turn the age of 72 years old. Unfortunately, there’s no getting around this, and withdrawals are subject to tax since these savings were not subject to tax before being put away. 

You may want to take advantage of QCDs but be sure to do it in plenty of time, as the deadline is 31st December and it is not encouraged to wait that long. This is the same with RMDs- you’ll need to plan taking these in advance since it takes time to sell the investments and have the proceeds delivered to you. 

Do you have a financial plan for the fourth quarter? Let’s have a chat to discuss your financial goals and how you can achieve them by taking action and working smart between October and December this year.