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The 7 Things to Do Before the End of the Year When it Comes to Your Taxes

Disclaimer: Sponsored content articles do not reflect the opinions of New Jersey Business magazine or the New Jersey Business & Industry Association.

By Gregory Dillon, CFA, CFP, NSSA, CLTC, Principal, OneTeam Financial, LLC

Yearend planning is challenging in 2021, with tax law changes possible. No matter what happens by December 31, these steps are likely to pay off:

[ ] Fill up your tax bracket. Some tax rates are low now. For instance, married couples filing joint returns can have up to $80,800 in taxable income, after deductions, and owe 0% tax on long-term capital gains, so you might want to sell some appreciated stocks.

Or, move money from regular IRAs to Roth IRAs, in a low bracket. Any future Roth gains will be tax-free, after five years and age 59-1/2.

[ ] Take required minimum distributions (RMDs). Your IRA custodian will tell you if they’re necessary. Shortfalls trigger a 50% penalty. The same fine applies to neglected RMDs from inherited retirement accounts—and custodians won’t give heirs any warning.

[ ] Make your match. Be sure you contribute enough to get any employer retirement plan match. Someone with a $100,000 salary should contribute at least $3,000 this year, if the match is 50% on 6% of pay, for example.

[ ] Harvest investment losses. If you’ve taken net capital gains so far this year, take any unrealized losses by December 31. You’ll avoid tax on your gains with a full offset, and you can buy back the securities you’ve sold after waiting 31 days, if you wish.

[ ] Harvest investment gains. If you have taken more losses than gains this year, sell securities at a profit. Without net gains, no tax will be due. You immediately can buy back the securities you’ve sold, and the increased purchase price will lower the tax on a future sale.

[ ] Think charitable thoughts. Crunch the numbers with your tax pro to see if you’ll be itemizing or taking the standard deduction. If you’re itemizing, make deductible charitable contributions in 2021. If you’ll take the standard deduction, donations this year won’t give you a tax break so defer them into 2022, when it may pay to itemize.

[ ] Play Santa. If estate taxes are a concern, use this year’s annual gift tax exclusion. Each person can give up to $15,000 of assets to each recipient, without limit. No tax will be owed, and you’ll reduce eventual exposure to estate tax.

It can pay to be generous, providing a happy ending to the year for everyone involved!


2021 Federal Income Tax Brackets and Rates for Single Filers, Married Couples Filing Jointly Rate For Single Individuals For Married Individuals Filing Joint Returns
10% Up to $9,950 Up to $19,900
12% $9,951 to $40,525 $19,901 to $81,050
22% $40,526 to $86,375 $81,051 to $172,750
24% $86,376 to $164,925 $172,751 to $329,850
32% $164,926 to $209,425 $329,851 to $418,850
35% $209,426 to $523,600 $418,851 to $628,300
37% $523,601 or more $628,301 or more
Source: Internal Revenue Service

Converting from a traditional IRA to a Roth IRA is a taxable event. A Roth IRA offers tax free withdrawals on taxable contributions. To qualify for the tax-free and penalty-free withdrawal or earnings, a Roth IRA must be in place for at least five tax years, and the distribution must take place after age 59 ½ or due to death, disability, or a first-time home purchase (up to a $10,000 lifetime maximum). Depending on state law, Roth IRA distributions may be subject to state taxes.

This material should not be construed as legal or tax advice and is not intended to replace the advice of a qualified attorney or tax advisor.

Securities and Investment Advisory Services Offered Through M Holdings Securities, Inc. A Registered Broker/Dealer and Investment Advisor, Member FINRA/SIPC. OneTeam Financial LLC is independently owned and operated. CA Insurance License #0M56722 File#: 3879977.1

Disclaimer: Sponsored content articles do not reflect the opinions of New Jersey Business magazine or the New Jersey Business & Industry Association.

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