Year-End Planning

November 12, 2019

Michael Syer, CFP®


As we approach the end of 2019, it is important to consider the tax planning opportunities available to lower your tax bill. While the Tax Cuts & Jobs Act of 2017 brought sweeping changes, many of the more valuable planning opportunities remain.

Review Capital Gains/Losses

Evaluate the positions you own and identify investments that have lost value. Consider a sale of some of those holdings to offset other realized gains, anticipated gains, or other income.

Charitable Planning

With the recent change in tax laws, many individuals take the standard deduction and no longer itemize. But for those who do, charitable donations can be an effective way to achieve your philanthropic goals while lowering your tax bill. Below are some available charitable strategies:

Donation of Long-Term Appreciated Securities: You will get a charitable deduction equal to the fair market value of the position while avoiding the capital gains tax associated with the appreciation.

Donor Advised Fund (DAF): As you get the charitable deduction when funding a Donor Advised Fund, a strategy of “lumping” your donations into one tax year could prove to be effective. You can then spread out your giving from the DAF over the next several years based on your charitable goals.

Qualified Charitable Distribution (QCD): If you are age 70½ or older, the IRS requires you to take required minimum distributions (RMD’s) from your retirement accounts. To reduce or eliminate the impact of this RMD income, you may want to consider a QCD. These transfers must be done direct to a qualified charity and are limited to $100,000, which will count towards your RMD while being excluded from your taxable income.

Annual Gifting

You can give to as many family members as you would like up to $15,000 per year ($30,000 per couple) without any gift tax consequences. This gift will not be included in your taxable estate and it is not taxable income for the recipient. Thus, annual gifting can be an effective strategy to pass down wealth without any tax consequences.

The annual gifting exclusion can also be used to fund a 529 education savings plan for a child or grandchild. You may also be able to contribute up to five years’ worth of gifts ($150,000 for a married couple) per beneficiary, as long as no other gifts are made during that time.

Maximize Retirement Saving

Retirement accounts can be tremendous vehicles for building tax-deferred retirement savings while potentially lowering your tax liability. Choosing the appropriate retirement account is important for your particular situation while also considering their contribution limits differ as depicted in the following table.

IRAs and defined contribution plans chart

Roth IRA Conversion

Although there are income limits to contributing directly to a Roth IRA, anyone can convert all or a portion of their traditional IRA’s to a Roth IRA. Unlike a traditional IRA, Roth IRA’s have no required minimum distributions and all distributions are tax-free.

Converting your IRA to a Roth IRA and paying the taxes now (the conversion is considered a distribution) can allow the account to grow tax-free and maximize the account value for your heirs.

Defer Tax Liability

By deferring income or accelerating deductions, you may be able to reduce your current tax liability and invest the money that would have been used to pay the taxes. This strategy could be particularly effective if you are in a lower tax bracket in the following year.

Deferring bonuses and self-employment income while accelerating charitable contributions or interest payments are other strategies that may defer your tax liability.

Want to Learn More?

Feel free to contact our Wealth Strategies group if you have questions on this estate planning topics or would like help connecting to an estate attorney.

Robert Katz, CFP® – Partner, Director of Wealth Strategies – 617.986.5145 

Michael Syer, CFP® Wealth Strategies Advisor – 617.986.5157


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