As we approach the end of the year, most people have a lot on their plates. With that in mind, the following list outlines several financial tasks that you can start taking care of now for a less stressful month of December.
Since the Tax Cuts and Jobs Act increased the standard deduction, many taxpayers no longer benefit from itemizing deductions (including charitable contributions). In 2022, the standard deduction amount is $12,950 for single taxpayers and $25,900 for married filing jointly.
That said, you can still support your favorite causes and organizations while also trying to reduce your taxes. Depending on your charitable intent and your goals (immediate and longer-term), one of the following strategies may be worth exploring:
A single person can give up to $16k to another individual each year, free of gift tax consequences, and married couples can give up to $32k per year to an individual. These limits also apply to 529 college savings plan contributions. Also, you can directly pay qualified education or medical expenses on behalf of loved ones without gift tax considerations.
Evaluate the optimal timing of taking losses to offset gains. If tax rates are likely to go higher, it may make sense to wait; but if this is an above average income year, it may be more valuable to realize a loss now*.
(*As always, be sure to consult with your tax advisors before taking action.)
People often ignore their employer retirement plans even though they can be one of your largest income sources in retirement.
If you are enrolled in a high-deductible plan, you are eligible to contribute to an HSA account. In 2022, the amounts are $3,650 for an individual, $7,300 for family coverage, and an extra $1,000 if over age 55. You technically have until April 15th of the following year to make the full contribution amount. Consider using a custodian that allows you to invest assets if you’ve accumulated a large balance. And if you have a Flexible Spending Account (FSA), make sure you use it all before year end or the balance will be forfeited.
You should do this every five years or whenever you have a change in your personal or financial circumstances.
Many homes have increased in value, or maybe you did a home improvement recently. Make sure your coverage limits are sufficient and that your umbrella coverage is enough to cover your investable asset levels.
This newsletter is intended for educational purposes only. For financial planning advice specific to your needs or for further information, please consult your portfolio manager.