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What's Your Tax Plan? Thumbnail

What's Your Tax Plan?

As 2023 winds down, take advantage of strategic tax planning to minimize your taxes and maximize your returns. You most likely have read these planning moves before, but all too often investors or their financial planners miss these tax moves. Hopefully, this is just a review for you. 

Based on your unique financial situation, consider completing these strategies before December 31.

Roth Conversions – If this strategy makes sense for your overall goals and planning, you can transfer (i.e., convert) IRA holdings to a Roth IRA, pay tax on the lower value, and let it grow tax-free in the years ahead. 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.

Got a Tax Plan?

I'll say it again, taxes will be the biggest drain on your portfolio. Be ruthless about minimizing your tax liability and optimizing your income.

If you have $1 million or more of investible assets and are in or close to retirement, let's connect on your tax plan in a complimentary strategy call. My financial planning firm, Soundmark Wealth Management, has three Certified Financial Planners (CFP™) and a CPA on staff that create common-sense financial plans for over 300 families across the nation.