Download the Tax Planning Guide

The end of the year represents the perfect opportunity to reflect on the last 12 months and to review your overall personal financial situation.  We’ve had a year to assess the impact of 2018’s tax reform bill and to understand how your own tax situation was affected.  Reviewing your tax returns and weaving together your tax planning with other areas of your personal finances – investment strategies and retirement planning – is an important and valuable aspect of the work we do for you as your trusted adviser. Below are some of the topics you should be thinking about before year-end:

Reduce Current and Future Tax Bills with Income Tax Planning

Ensure you are implementing tax reduction strategies like maximizing your retirement plan contributions, tax loss harvesting in portfolios and making charitable contributions. Managing your tax bracket over multiple years is the best way to minimize your income tax bill under the new tax regime. The best way to do this is to run a multi-year tax projection to see if you can take advantage of strategies like bunching deductions into high income years, harvesting gains in low tax years or doing Roth IRA conversions.

Review Your Estate Planning Documents

We find it is helpful to prepare a flowchart of your current estate plan to visualize what would happen to each of your assets and how the current estate tax law will impact you.  Be sure that your estate planning documents are up to date – not just your will, but also your power of attorney, health care documents, and any trust agreements – and that the beneficiary designations are in line with your desires. If you might be subject to the estate tax, consider annual gifting of up to $15k, paying medical expenses/tuition directly, and charitable giving. Don’t forget to consider the impact of any state estate taxes, which could differ from the Federal estate tax exemptions. See our estate planning guide here for more in depth guidance.

Rebalancing Your Investment Strategy

Equity markets have seen strong performance this year and this could have left your stock allocation higher than you are comfortable.  Regular portfolio rebalancing will allow you to maintain the appropriate amount of risk in your portfolio.  Retired and living off your portfolio? You’ll want to make sure your cash reserve is maintained to cover living expenses so that you do not have to sell equities in a down market. Given the current low interest rate environment, it’s important to shop around for the best savings or money market rates for this cash.

Avoid Capital Gains with Charitable Giving

There are many ways to be tax efficient when making charitable gifts. Donating appreciated stock allows you to avoid paying capital gains while reducing your stock allocation and receiving a charitable deduction. You might consider “bunching” charitable deductions by deferring donations to next year or making your planned 2020 donations in 2019. If the numbers are large enough, you might even consider a private foundation or donor advised fund for your charitable giving.  If you are over 70.5 and planning on making charitable contributions, you can make these contributions directly from your retirement account this can reduce your tax bill without itemizing.

Saving for Retirement Planning

Think about your future when working becomes optional.  Whether you expect a full retirement or a career change to something different, determining an appropriate balance between spending and saving, both now and in the future is important. There are many options available for saving for retirement, and we can help you understand which option is best for you.

Contact Us

The decisions you make each year with your personal finances will have a lasting impact.  We hope this information has begun to generate some insight to areas of your personal finance that need attention.  Please, click here for the full Year-End, Year-Round Tax Planning Guide.

If you have questions about the information in the guide, and wish to speak with a member of our tax team at no cost, contact us here, or call 513-241-8313.