.jpg)
The year is quickly coming to an end. I am shocked every year by how quickly December comes back around. This is when we take time to reflect on the year’s accomplishments and progress towards our goals. If you still have some financial planning strategies to implement, here are a few that you will need to execute before the end of the year to be considered in the current year.
Tax-loss harvesting is a tax strategy that involves selling investments that have lost value to offset capital gains from other investments. Excess realized losses can help reduce your overall tax bill by claiming a capital loss deduction up to the annual limit. Remaining losses may be carried forward to future tax years. Additionally, you can sell investments that have unrealized capital gains over multiple tax years to spread out capital gain taxes for tax efficiency.
Roth IRA conversion is the transfer of all or part of a pre-tax account into a Roth account. The amount you transfer out of your pre-tax account may be taxed as ordinary income. Refer to your prior tax returns and IRS Form 8606 for tracking and reporting after-tax money in your pre-tax account. Future growth can then grow in your Roth account tax-free when you take qualified distributions.
Required Minimum Distribution (RMD) must be distributed from your required retirement accounts and/or inherited retirement accounts. Failure to meet your RMD could result in a 50% tax penalty on the amount of your RMD that was missed. You may be able to self-correct the shortfall. Talk to your tax advisor and refer to the instructions on IRS Form 5329 for further instruction. Additionally, you may need to amend your income tax return for the year the shortfall occurred.
Charitable contributions and Qualified Charitable Distributions (QCD) must be completed before the end of the year to be considered a current year gift for tax purposes. Keep in mind, you can donate cash as well as appreciated assets to a charity. However, a QCD must be distributed from a qualifying retirement account which is also subject to an RMD and the owner is 70.5 or older.
It is very important to consider these strategies as part of your holistic financial plan. Every year, we help our clients build and implement strategies to best help them achieve their goals. We can help you reach your goals to.
