Year-End Tax and Investment Planning

Year-End Tax and Investment Planning

By taking a proactive role in tax and investment planning, you can save yourself a lot in taxes, improve returns, and ensure that more money remains working toward your goals — and less going to the IRS.

The end of the year is the perfect time to review financial planning needs with a professional.  The checklist below can help you review your investment portfolio, assess year-end tax planning opportunities, review retirement goals, and manage wealth transfer and legacy plans.  You may also want to consult a tax professional as you comprehensively consider your options.

The 2020 Year-End Planning Checklist:

✓   Investment Portfolios

• Recognize capital gains/losses.
• Review strategies to avoid wash loss sales.
• Consider executive compensation provisions.
• Rebalance portfolios.

✓   Income Tax

• Manage income tax brackets.
• Lower taxable income for closely-held business owners.
• Ensure appropriate tax withholding.
• Reduce AMT liability.
• Evaluate state income/estate taxes.

✓   Retirement Planning

• Fund retirement accounts.
• Contribute to health savings accounts.
• Fund Roth accounts for children.
• Weigh Roth conversions.
• Review beneficiary designations.
• Weigh retirement account distributions and withdrawal strategies.
• Review benefit selections for Social Security and Medicare.

✓   Wealth Transfer and Legacy Planning

• Make annual gifts.
• Fund 529 plans.
• Fund charitable giving.
• Consider Donar Advised Funds.
• Elect qualified IRA charitable distributions.
• Consider advanced estate planning strategies.
• Conduct family meetings/mission statements. 

☼  Creative Planning Solutions

Investors might not realize the full breadth of planning solutions and options available to them.  Each individual's situation is different, but we all share a similar objective of minimizing investment taxes when possible by taking full advantage of tax-deferred and tax-advantaged accounts.  A few ideas:

• Converting your triple tax-advantaged health savings account (HSA), where contributions, growth, and withdrawals are all tax-free, into an investment account with annual contribution limits for families up to $7,100 or $8,100 for those over 55.
• Opening an HSA for adult children who have income and are still on their parent's plan with contributions up to $7,100.
• Solo 401-k for sole proprietors or those working with a spouse with annual contributions up to $63,000, including a Roth feature.
• Backdoor Roth contributions or conversions for individuals or couples with incomes above $124,000 and $196,000, respectively, with the desire to minimize future retirement taxes.
• Spousal IRA contributions for non-working spouses.
• Roth contributions for children with earned income.
• Front-loading 529 educational accounts to take full advantage of tax-deductions plus tax-free investment growth.
• Donor-Advised Funds (DAF) and qualified IRA charitable contributions to maximize charitable giving and deductions.

About Linden Wealth Management

As a fiduciary and fee-only advisor, I don't make money by selling financial products.  I'm free to recommend the strategies and investments that make sense for couples and individuals, based on a clear understanding of where you're heading in life.

Questions?  Please reach out to me via my email with any questions that you might have.

Need more information?  Visit my website!

*This content is developed from sources believed to be providing accurate information. The information provided is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any federal tax penalties. Individuals are encouraged to seek advice from their tax or legal counsel. Individuals involved in the estate planning process should work with an estate planning team, including their own personal legal or tax counsel. Neither the information presented nor any opinion expressed constitutes a representation by us of a specific investment or the purchase or sale of any securities. Asset allocation and diversification do not ensure a profit or protect against loss in declining markets.