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Consider This Holiday Gift to You & Your Family: An In-depth Tax Review Before the End of 2020

Consider This Holiday Gift to You & Your Family: An In-depth Tax Review Before the End of 2020

December 11, 2020
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As the year comes to a close, now is a good time to consider preparing for the 2021 tax season. Yes, we know it’s early, but this is the best time of year to consider what the tax implications might be for financial decisions you make before year’s end.

And although your Accountant or CPA will be handling your taxes with you and can impact your tax obligations, there are several reasons why you need to discuss your decisions with your financial advisor as well.

  1. Your financial advisor may actually address more of your overall finances. The financial advisor may have in-depth insights into how best to make timely financial decisions to benefit you and your family.
  2. One tax mistake could eliminate years of profitable investing and your financial advisor will be looking out for the right investment opportunities for you as well as any tax implications that come along with it.
  3. Being aware of your tax situation can help you to accumulate greater wealth because building wealth is not just about your tax liability today. Long term financial planning can make a difference in the amount of taxes you pay over many years, which will enable you to have more money to invest over the long term
  4. If planned correctly, you can have the benefits of building wealth and maintaining a lower tax rate. Working with a financial advisor that gets to know your overall financial picture, you can receive investment strategies that will help you retain more wealth. 

As you can see there are many different scenarios and ramifications for how you end your year. A few other things to consider:

  • If you are nearing the age where you might take social security income, consider all of the options and tax implications over the long term
  • Check your IRA distributions
  • Contribute the maximum to your retirement accounts
  • Be aware of the Alternative Minimum Tax (AMT) - this year-end issue means that certain expenses that are deductible under the regular rules are not deductible under the AMT
  • If you’re at least 70-1/2 by January 31, 2021, be sure to discuss your RMD with your CPA and your financial advisor
  • Consider selling off losing investments to offset gains
  • Consider a gifting plan
  • If you have school age children or grandchildren, consider a 529 or other educational savings approaches, in 2020 you could gift up to $15,000.

Simon Says® the end of the year is always a good time to revisit your financial situation. As this very unusual year comes to a close, do some serious evaluations of your financial plan, including how your tax obligations may affect the coming year and beyond. Before year’s end, have a conversation with your financial planner and your accountant, perhaps having them speak to each other as well.

If you would like to have a conversation with me about your overall financial plan or get a second opinion, I would be happy to discuss any of this on a Zoom call with you. You can set up a convenient time through my calendar app. I look forward to hearing from you.

Wishing you and your extended family a very happy and healthy Holiday Season
and a New Year filled with good things.