As the leaves change colors and we begin to think about year-end, we created a checklist to help you get a head start on getting your finances in order with your trusted advisor. While many items related to taxes, estate planning, income, and capital gains should be considered every year, others are specific to 2021 and what may lie ahead.
1. Taxable Accounts
Realized capital losses may be used as an offset for capital gains or ordinary income in the same tax year.
- Consider selling some investments that have lost value in order to offset some or all of the gains on others.
- Review your prior year’s tax return to see if you have a capital loss carryforward.
- Consider selling some underperforming mutual funds prior to any expected taxable distributions to minimize unrealized gains.
2. Required Minimum Distributions (RMDs)
Although the CARES Act suspended all RMDs for 2020, they are back in effect for 2021 for all defined-contribution retirement plans, so work with your financial advisor to determine the amount and any tax saving strategies.
- Consider a qualified charitable distribution (QCD). No matter your RMD amount, you can give up to $100,000 to charities from an IRA as QCDs. Read more about QCDs.
- Consider converting to a Roth. (Note: A Roth conversion would be in addition to any RMDs, and RMDs don’t count toward a conversion.)
3. Retirement Contributions
It’s generally a good idea to maximize your contributions to qualified retirement accounts.
- Make any IRA, Roth IRA, HSA, and Backdoor Roth make-up contributions before April 15th of next year.
- If you are self-employed, consider establishing a solo 401(k) before December 31st, and fund any existing solo 401(k) or SEP IRA prior to filing your tax return.
4. Gifting
Each year, you can give someone up to $15,000 in cash or assets (e.g., stocks, land, a car) with no tax consequences. However, gifts of over $15,000 require that you file a gift tax return. Some states offer tax incentives for 529 Plan contributions and education gifts.
- When contributing to medical and education institutions, make your checks out directly to the institutions so the gifts don’t count toward the annual exclusion.
- Plan ahead for any gifts to donor advised funds (DAFs) and grants, which could be delayed if you wait until December.
- Be aware that proposed legislation would change or significantly reduce the lifetime exemption amounts from the current $11.7 million (individual) and $23.4 million (married).
- Notify your accountant of completed gifts and charitable contributions, including any that happened earlier in the year.
5. Debt
Year-end can be a great time to review how you are managing your debt.
- Consider refinancing a home mortgage or home equity loan.
- Pay off any consumer debt, if possible.
- Pay down margin interest on your investment accounts, especially if you plan to take a deduction for the interest.
If you have questions or wish to speak with a Wealthspire advisor about your situation, please contact us.
Wealthspire Advisors LLC is a registered investment adviser and subsidiary company of NFP Corp.
Certified Financial Planner Board of Standards, Inc. (CFP Board) owns the certification marks CFP®, Certified Financial Planner™, and CFP® (with plaque design) in the United States, which it authorizes use of by individuals who successfully complete CFP Board’s initial and ongoing certification requirements.
The Center for Fiduciary Studies owns the mark AIF®, which it awards to individuals who successfully complete initial and ongoing accreditation requirements.
The ChFC® and CLU® marks are the property of The American College, which reserves sole rights to their use, and are used by permission.
This information should not be construed as a recommendation, offer to sell, or solicitation of an offer to buy a particular security or investment strategy. The commentary provided is for informational purposes only and should not be relied upon for accounting, legal, or tax advice. While the information is deemed reliable, Wealthspire Advisors cannot guarantee its accuracy, completeness, or suitability for any purpose, and makes no warranties with regard to the results to be obtained from its use. © 2021 Wealthspire Advisors
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