Year-End Tax Savings

By Jessica Syme, CPA

October 10, 2020

Fall is finally here! As 2020 draws to a close, it’s important to keep tax planning strategies in mind. Grab your favorite pumpkin-flavored drink, and let’s take look at some important potential tax savings:

  1. Take advantage of tax saving charitable gifting options:
    • If possible, group charitable donations to maximize your tax savings. Consider gifting to charity every two years, and then taking advantage of the large standard deduction in the off years.
    • Donor Advised Funds allow you to set up a charitable investment account so that you can utilize the above strategy, but your favorite charitable organization continues to receive income on a regular basis. Also, the earnings in the account are tax-free.
    • Qualified charitable distributions to a charity directly from your retirement accounts are a great option: the dollars distributed are tax-free.
    • Gifting appreciated securities to charity can be utilized to avoid capital gains tax.
  2. Required Minimum Distributions (RMDs) are not required in 2020. RMDs are taxable income, so choosing to not withdraw that amount this year will lower your tax.
  3. Take advantage of your capital losses! “Loss Harvesting” is a strategy that sells capital assets, such as stock with unrealized losses, in the same year that you sell appreciated capital assets. This allows you to maximize the offset of capital gains, resulting in tax savings. Check with your investment advisor today to see if this fits in with your investment strategy.
  4. Have you fully-funded your employer retirement plan? Amounts contributed to most retirement accounts are tax-deferred, meaning it will be taxed when withdrawn in retirement when you may be in a lower tax bracket.

These are a few of the possibilities to lower your 2020 taxes. Discussing your specific tax situation with a qualified tax advisor can ensure that you are maximizing your tax savings. Give us a call to set up a meeting – in person or virtually – to find what opportunities we can explore for you!

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