As we approach the end of this extraordinary year, it is a perfect time to take account of the year and begin to plan for the future. Whether it is economic models, capital market assumptions, or political headwinds, we must consider year-end planning techniques that may protect and increase your net worth and possibly modify your financial and investment plans.

Investment and Income Tax Strategies


Capital Gains and Loss Harvesting

☐ Re-evaluate your asset allocation as many of your stocks may have appreciated significantly in the past several years. Rebalancing can be a valuable tool in long-term investment performance.

☐ Understand how capital gains taxes can affect your mutual fund investment returns. You may realize taxable phantom income. Consider delaying investment in mutual funds to avoid inlaid capital gains.

☐ Consider harvesting losses in taxable brokerage accounts to offset gains

☐ Consider your investments and whether or not you are interested in allocating a portion to an Impact or Socially Responsible investing fund.

Retirement Planning

☐ If you do not have a company pension plan, maximize annual IRA contributions. You may be able to deduct up to $6,000 ($7,000 if you are over the age of 50) for your IRA and $6,000 for your spouse’s, and you may be able to deduct all or part of the contribution even if you have a company plan, depending on income limitations. You have until April 15 to make your 2021 IRA contribution.

☐ Self-employed persons should consider defining a benefit plan to supercharge their retirement planning, especially for older workers/owners. We get a lot of requests for this type of strategy towards the end of the year, but because of regulations, it is often too late. If you are too late for this year, go ahead and get a plan put in place for next year. They can be complicated and expensive, so discuss with your tax advisor before setting one up.

☐ Recent legislation has made ROTH IRA’s a more powerful retirement and estate planning tool. Understand what a ROTH Conversion can do for your retirement income and estate planning advantages. If you have had a slowdown in your business or revenue, a ROTH conversion could be used to offset business losses and increase the after-tax value of your retirement investments. If your retirement plan is a large part of your taxable estate, there are reasons a Roth Conversion may save estate taxes and increase the wealth passing to your heirs.

☐ Consider setting up ROTH IRA accounts for your children with earned income.

☐ Check your FSA Balance and spend as needed. FSA money is not normally eligible for rollover, and any unused funds from 2020 need to be spent before 12/31/2021. Check with your employer’s HR department to see if the company plan allows for any carryover of unused benefits.

Gifting and Charitable Giving Strategies

☐ Consider making gifts the maximum gifts allowed under federal annual gift tax exclusion

o Use assets that are likely to appreciate significantly for optimum tax savings;

this is good when making substantial gifts in irrevocable trusts, etc.

o Consider high Standard Deduction in determining tax benefits on charitable giving.

☐ Use appreciated stock rather than cash when contributing to charities. This maximizes your charitable deduction and avoids the capital gains tax on significantly appreciated assets.

☐ Consider setting up a Donor Advised Fund (DAF) while in prime working years (or if you are in a high tax bracket) and gifting appreciated stocks or other assets. Assets in a DAF grow tax-free and are not required to be gifted annually, therefore growing a family-controlled charitable fund used for charitable purposes into retirement and beyond.

o Consider “bunching” years of contributions into a DAF during high tax years.

☐ In years your income is higher, consider a Charitable Remainder Trust or Charitable Lead Trusts. These trusts are complicated but can provide many tax and estate planning benefits.

Current estate tax exemption of $11.7 Million for individuals and $22.4 Million for married couples (increasing to $12.06m Single $24.12m Married in 2022) are set to “sunset” or expire 12/31/2025. If you have assets near or approaching $5MM, this is a great opportunity to sit down with our Estate Planning team to discuss strategies for minimizing tax costs and maximizing yours and your family’s legacy.

Next years tax plan proposal is not finalized as of this writing (11/15/2021), so stay tuned for updates on our Twitter or our blog.

As always, if I or someone from our team can help you with year-end planning, please get in touch with us directly here:

Asset allocation does not assure or guarantee better performance/profit and cannot eliminate the risk of investment losses in declining markets.

This information should not be construed as tax advice, nor should be taken as financial planning advice. Please consult your tax professional. These opinions are based on observations and research and are not intended to predict or depict performance of any investment. These views are as of the close of business on 11/15/2021 and are subject to change based on subsequent developments. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. These views should not be construed as a recommendation to buy or sell any securities. Past performance does not guarantee future results.

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