Get Tax Smart

With the end of the year approaching, take advantage of the bear market in both stocks and bonds to minimize your taxes and maximize your returns.

Take a minute to review our short list of strategies to consider completing before December 31.

Roth Conversions
During a down market, and if it makes sense for your overall goals and planning, you can transfer (i.e., convert) depreciated IRA holdings to a Roth IRA, pay tax on the lower value, and let it rebound tax free as the market recovers. You’ll want to make sure you have cash on hand to pay the tax on the converted dollars.
 
Qualified Charitable Distributions (QCDs)
If you’re at least age 70 ½, taking required minimum distributions, and are in a high-income tax bracket, you may consider donating to your designated charities via QCDs rather than from your taxable accounts. QCDs are limited to $100K annually but can be counted toward satisfying your required minimum distributions for the year. As an added benefit, the amount donated is excluded from both your adjusted gross income (AGI) as well as taxable income and thus, could lower the impact on other tax items.
 
Stacking Charitable Donations
Due to the high standard deduction, especially for those married filing jointly (MFJ), charitable contributions exceeding $600 (for MFJ) do not always allow for the maximum tax benefit available. Rather than making small gifts each year to your designated charities, you can “batch” multiple years of donations into a single year to exceed the standard deduction and get the increased tax benefit for your contributions.
 
Donor-Advised Fund (DAF)
For those charitably inclined and who have highly appreciated securities in their taxable accounts, setting up a donor-advised fund may be the right path for you. In a high-income year, you could donate a large sum to your DAF, get the benefit of the tax deduction in the year the transaction takes place, and donate the funds at the same time or over several years to any IRS qualified charitable organization of your choosing.

Tax Loss Harvest
Down markets may create opportunities to harvest any net losses which can help to offset future gains.

Focus on Tax Planning
We build financial plans that focus on minimizing your taxes while maximizing your gains. Strategize with me and build a plan for the new year.