Turkey, Then Right to Tax Planning: 5 Year-End Tax Tips

November 29, 2019

Many of us have reasons to be thankful, but others are going through difficult life events. Click here for a list of our resources for those going through divorce or who have lost a loved one.

In gratitude for all we have received, our team celebrated “Worksgiving.” Hope you and yours enjoyed a happy turkey day!

Pictured from left to right: Jesse Kuusisto, Associate Wealth Manager; Michael Tryon, Portfolio Analyst; Laura Kuntz, CPA/PFS, MBT, Senior Wealth Manager/Shareholder; Saul Baumann, CFP, Wealth Manager; Mallory Kretman, CFP, Wealth Manager/Shareholder; Tom Kuntz, Finance Manager; Linda Beduhn, Client Service Specialist.

Five Year-End Tax Tips

Per Morningstar, comprehensive financial planning may add 1.6% every year to your pocketbook(1). A key part of this is tax reduction. Below you’ll find 5 year-end tax tips. As our clients know, we customize these and other strategies to their situation and preferences – not all strategies fit all people. Of course, consult your CPA/Tax Advisor on your tax opportunities.

Tip #1: Complete a Qualified Charitable Distribution. If you’re charitably inclined and age 70½ or older, you can complete a donation directly from your IRA to a qualified charity. This charitable distribution isn’t taxed as income! 

Tip #2: Recognize income with a Roth Conversion or IRA distribution, taking advantage of lower tax rates before they pop back up in 2026. In 2026, many of the modifications from the 2017 tax act are scheduled to expire, including currently lower tax rates on many levels of income. Consider bringing some income forward into your lower-taxed years to avoid higher future taxes. Add tax-free growth through a Roth conversion to increase the sizzle!

Tip #3: Set up a Donor-Advised Fund. If you’re charitably inclined and you have a position in your portfolio you don’t want to sell due to the large gain, you can open a Donor Advised Fund (DAF) and contribute the position. You receive the tax write-off* this year from the charitable gift, and yet neither you nor the charity pay tax on the gain. You use the proceeds from the sale to make charitable grants now or over time.

*If you don’t itemize deductions, consider “bunching” your charitable contributions into 2019 or a particular year to potentially qualify for itemizing.

Tip #4: Complete an IRA, work retirement plan contribution, or HSA contribution to reduce your 2019 tax and/or reduce tax in the future. For 2019, the IRA contribution limit is $6,000 ($7,000 if you’re over 50), the 401(k) contribution limit is $19,000 ($25,000 if you’re over 50), and HSA contribution limit is $3,500 for a self-only HSA and $7,000 for a family HSA (if you’re over age 55 the limit is $4,500 & $8,000 respectively). Keep in mind, you have several IRA choices, non-deductible, deductible and Roth – one of them will likely be helpful to you.

Tip #5: Plan out your capital gains/capital loss recognition. Sell some loss assets this year to shelter gains. Or, at the opposite end of the spectrum, if your income is low, you might qualify for the 0% federal capital gains tax bracket. Also, consider your income over the next several years, and consider pushing gains toward lower income year, for example, the retirement years, BUT, don’t let “the tax tail wag the dog.” Investment considerations should generally trump tax considerations.

Other Quick Tips

  • “Spice up” your holiday family visit by asking these simple questions to capture your family’s stories. Click here.

  • As we give thanks, we often take stock of what is important to us. If you would like your investments to align with certain values, consider Socially Responsible Investing (SRI). Click here for a video of our Wealth Managers, Laura & Saul, giving an overview of this topic.

(1) https://www.morningsar.com/content/dam/marketing/shared/research/foundational/831611-GammaEfficientPortfolio.pdf

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