5 Year-End Tax Moves to Make Now

5 Year-End Tax Moves to Make Now

The month of December can be busy. However, if more money in your pocket and less in the government’s coffers, is one of your goals then we need to focus on accomplishing some last-minute tasks that make take a few minutes.

  1. Maximizing your retirement contributions in your employee or self-employed retirement account should be a priority since one or two pay periods are all that are left this year. Some tax-deductible transactions can be made after December 31st and still count on your tax return, but not many. Traditional IRA contributions can be made until April 18, 2023, but are subject to Modified Adjusted Gross Income (MAGI) limits and if you have a plan at work that is subject to limits, rather than self-employment. Roth IRA contributions are not deductible.


  1. Sell investment losses to offset already sold capital gains or sell investments that contain gains to take advantage of losses you might want to sell. This is called “tax loss harvesting” and should include professional (adviser and/or CPA) direction to maximize your deductions and avoid new taxes. Some losses, up to $3,000, can offset ordinary income to reduce income taxes and the remainder can be rolled over to the following year 2023, and maybe beyond if you don’t have capital gains to offset larger losses.


  1. Pay deductible bills in advance if you are close to the standard deduction limits of $12,950 single, $25,900 married or $19,400 head of household. What kind of bills can you prepay? Mortgage payments to recognize interest payments, and unreimbursed medical expenses that exceed 7.5% of your adjusted gross income. Property taxes up to the $10,000 limit for state and local taxes is another item to review. Parents of college students might want to prepay the first quarter or semester of tuition and not even have to itemize to take advantage of The American Opportunity Tax Credit worth up to $2,500 subject to MAGI limits beginning at $160,000 for married couples filing jointly. Don’t forget your own learning tax credit opportunity using the Lifetime Learning Credit for up to 20% of your out-of-pocket costs for tuition, fees, and books up to a maximum of $2,000. Again, MAGI limits for married couples begin at $160,000.


  1. Group multiple years of charitable giving in a large lump sum(s). The easiest way to move charitable donations into one year to take advantage of exceeding the standard deduction limits is to create a “donor advised fund”. Major brokerages like Vanguard and Fidelity offer this service to their clients to use securities with large capital gains to avoid tax on sale and pay designated charities at your direction. There are also community foundations that provide this service. You can also send money directly to individual charities and tell them that your donation is for several years.


  1. 529 fund contributions earn state tax deductions. 35 states offer some form of state tax deductions for contributions to 529 College Saving Plans. Remember these funds grow tax free and when withdrawn for qualified education expenses there is no tax due for both state and federal tax returns. These funds can cover tuition, fees, books, and room and board.

Good luck with tax savings this year. Please spend a few minutes as soon as possible since most of these are only good through December 31st. Happy Tax Planning!

Anna Sergunina
Anna Sergunina

I'm Anna Sergunina, CFP®, President & CEO at MainStreet Financial Planning, Inc. My passion lies in serving others through financial planning, helping clients achieve their dreams like buying a home, saving for education, or retiring early. With over two decades in the industry and a CFP designation since 2009, I'm dedicated to excellence and continuous growth. Beyond work, I cherish moments with my son Liam, prioritize self-care, and engage in content creation for my Money Boss Parent Podcast and Money Library blog.

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