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  • Writer's pictureStephen H Akin

Merry Christmas

Happy Holidays and all the best to you in the year to come!

As we come to the end of the year here are a few savvy financial moves to consider making before December 31.

Tax Loss Harvesting:

Tax-loss harvesting is an optimization method that allows you to offset taxes on capital gains. It works by selling your underperforming investments and replacing them with comparable assets. Then, you’ll be able to claim the losses you’ve incurred when you file your taxes, lowering the amount you need to pay.

Maximize all other tax-deferred savings accounts

Maximize your 401(k):

Contributing the maximum amount to your tax-deferred employer-sponsored retirement plan can help reduce your taxable income for the current year. In 2023, the maximum contribution for 401(k)s and similar plans is $22,500 ($30,000 if age 50 or older).

Money set aside in these tax-advantaged accounts can potentially help reduce taxable income, and with these, you'll have until Tax Day to make contributions for the prior tax year. For 2023, the maximum contributions are:

Health savings accounts (HSAs):

$3,850 for individuals ($4,850 if 55 or older) and $7,750 for families ($8,750 if 55 or older). HSAs provide many tax benefits, including tax-free earnings and withdrawals (when used for qualified medical expenses), and if you itemize, you can deduct after-tax contributions.

Traditional IRAs:

Up to $6,500 ($7,500 if you're 50 or older). However, if you or your spouse are covered by an employer retirement plan, contributions to a traditional IRA may not be fully tax-deductible and deductions may be phased out.

Get the most benefit from your giving!

In 2023, you can give away up to $17,000 ($34,000 if married) per person to an unlimited number of people without eating into your lifetime estate- and gift-tax exemption. This won't reduce your taxable income for the year, but it will allow you to strategically transfer wealth to your heirs tax-free.

If charitable giving is part of your financial plan, act by year's end to ensure your donation is as tax-efficient as possible:

Charitable donations:

In general, you can deduct cash donations to qualified charities worth up to 60% of your adjusted gross income (AGI), which is your total gross income minus certain deductions. Donating appreciated long-term investments can be especially tax-efficient because you don't have to recognize the capital gains and you can receive a tax deduction for the full fair-market value of the donation (up to 30% of your AGI).

Qualified charitable distribution (QCD):

If you're 70½ or older, in 2023 you can donate up to $100,000 to a charity directly from your IRA using a QCD. You won't receive a tax deduction for the donation, but the gifted amount can be used to satisfy all or part of your RMD without adding to your taxable income. 

Take your (RMDs) Required Minimum Distributions:

If you're age 73 or older, you generally must take Minimum Distributions from your tax deffered retirement accounts by the end of the year. If you miss the deadline, you could be subject to a 25% penalty on the portion of your RMD you failed to withdraw.

Take the next step, schedule a free consultation and learn how we can help you.

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