End-of-Year Money MovesSubmitted by Kaizen Financial Advisors, LLC on November 22nd, 2019
What changed for you in 2019? Did you start a new job or leave a job behind? Did you retire? If notable changes occurred in your personal or professional life, then you will want to review your finances before this year ends and 2020 begins.
Even if your 2019 has been relatively uneventful, the end of the year is still a good time to get cracking and see where you can manage your tax bill and/or build a little more wealth.
Tax-loss harvesting is a strategy to take capital losses (selling securities worth less than what you first paid for them) to offset short-term capital gains. Up to $3,000 of capital losses in excess of gains can be deducted from ordinary income each year, and any remaining capital losses above that can be carried forward to offset capital gains in future years.
If you itemize deductions, now would be a good time to get the receipts and assorted paperwork together. While many miscellaneous deductions have disappeared, some key deductions are still available: the state and local tax (SALT) deduction, now capped at $10,000; the mortgage interest deduction; the deduction for charitable contributions, which now has a higher limit (60% of adjusted gross income); and the medical expense deduction.2,3
Max out your 401(k) or 403(b) contributions in your final paychecks. Contributions to these retirement plans may lower your yearly gross income. Note that contributions to Roth 401(k)s and Roth 403(b)s are made with after-tax rather than pre-tax dollars, so contributions to those account types are not deductible and will not lower your taxable income.4,5
If you are retired and older than 70½, remember your year-end RMD. Retirees over age 70½ must begin taking Required Minimum Distributions from traditional IRAs and 401(k), 403(b), and profit-sharing plans by December 31 of each year. The I.R.S. penalty for failing to take an RMD can be as much as 50% of the RMD amount that is not withdrawn.6
Gifts to qualified charities or non-profit organizations made before year end may qualify as a tax deduction. You must itemize deductions using Schedule A to claim a deduction for a charitable gift.4,5
While we’re on the topic of estate strategy, why not take a moment to review your beneficiary designations? If you haven’t reviewed them for a decade or more (which is all too common), double-check to see that these assets will go where you want them to go, should you pass away. Lastly, look at your will to see that it remains valid and up to date.
See that you have withheld the right amount for federal taxes. If you discover that you have withheld too little so far, you may need to adjust your withholding before the year ends and make estimated tax payments.
Kaizen Advisors review tax-loss harvesting opportunities, RMDs, estate plans and account beneficiaries, and withholdings for federal taxes. If you have questions about your year-end financial tasks, please do not hesitate to reach out to a Kaizen Advisor.
This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this newsletter (article), will be profitable, equal any corresponding indicated historical performance level(s), or be suitable for your portfolio. Due to various factors, including changing market conditions, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter (article) serves as the receipt of, or as a substitute for, personalized investment advice from Kaizen Financial Advisors, LLC. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. A copy of our current written disclosure statement discussing our advisory services and fees is available for review upon request.
1 - investopedia.com/articles/taxes/08/tax-loss-harvesting.asp [2/26/19]
2 - nerdwallet.com/blog/taxes/itemize-take-standard-deduction/ [9/6/19]
3 - investopedia.com/articles/retirement/06/addroths.asp [7/28/19]
4 - investopedia.com/articles/personal-finance/041315/tips-charitable-contributions-limits-and-taxes.asp [6/5/19]
5 - marketwatch.com/story/how-the-new-tax-law-creates-a-perfect-storm-for-roth-ira-conversions-2018-03-26 [2/24/19]
6 - forbes.com/sites/leonlabrecque/2019/04/09/bigger-iras-proposed-new-tax-law-may-let-you-build-a-bigger-ira-in-retirement/ [4/9/19]