It’s smart to review your tax strategy and planning to keep more money in your pocket. Use the checklist below as a starting point to see what might apply in your situation.

  • Maximize contributions to your employer retirement accounts (401k, 403b, etc) ✅
  • Maximize contributions to your Individual Retirement Accounts (IRA) ✅
  • Top off your Health Savings Account (HSA) ✅
  • Take your Required Minimum Distributions (RMD) ✅
  • Consider making a Qualified Charitable Contribution (QCD) ✅
  • Use a Donor Advised Fund to implement a bunching strategy. ✅
  • Consider a Roth Conversion (or multi-year Roth Conversion strategy) ✅
  • Tax Loss Harvesting: sell investments at a loss to offset gains. ✅
  • Tax Gain Harvesting: sell gains if you are in a low tax bracket. ✅
  • Make sure to use your Flexible Spending Account (FSA) money. ✅
  • Can you defer income to 2022 to save on taxes?  [might not be a good idea based on potential increasing tax brackets]✅
  • You can give away 100% of your income as a Cash donation in 2021! ✅

Find out more about Mike at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/

Transcript
[:

As I discuss strategies with Matt on his radio broadcast, enjoy the show. 


[:

by our resident guru expert, in chief Mike Morton 


[:[:

And you. 


[:[:[:[:

And the first reaction they're gonna. What a bummer. I'm not ready to face year-end I haven't even hit Halloween. I haven't even hit Thanksgiving. Don't talk to me about end of year. It's going to stress me out. But the fact of the matter is these things creep up on us. And before. You don't have the lead time that you need to do all of the clever little strategies that you're about to run down. 


Am I right? So this is in my mind, the perfect time to do year-end tax planning, and to hear from you about all the smart things you can do to save more money, make more money, defeat your enemies, w whatever else you're planning to present, you. 


[:

So this is a good time for just bringing it up. And as Matt said not necessarily having to step on this right away, still have plenty of time to implement these things, but it is a good time to start thinking about them. Just so you have a script for. Hey in November, December when I actually have to, do some of these things that need to happen before year end, you already have an idea of what those might be. 


[:

And so maybe if you want to hit some of these year-end strategies that you're about to lay out the time to act is right now. So that those changes roll in for a couple of months. , why don't we start at the beginning novel concept? 


[:[:

Yeah. Shouldn't you start midway and then it turns out that time is moving differently for Tom Hardy or something. All right. 


So what's the first thing you should do here in terms of prepping for end of year. 


[:ot hitting those maximums for:

Okay. So don't just go out there and be like, oh, Mike said, do this one first. It's this is not necessarily in priority order for account funding. We did have an episode and a blog post about account order, which ones you should fund first. And your IRA is actually tends to fall above maxing out your 401k, but anyway, employer retirement plans. 


ed out for this calendar year:[:

Is there a website that people could go to if they're glazing on things you're saying right now to get a checklist for what they should be doing In 


[:

So that's why it's good to review it and see which things make sense for you. 


[:[:

Anything you put into a tradition. And that's what the capital T traditional 401k or traditional IRA comes off your taxes, that amount of income that you're contributing comes off your taxes. So you save whatever your marginal tax rates for this year. So you can max out those IRAs. You could do that towards the end of this year 6,000 for individuals. 


If you're under 57,000, if you're over 50 per person, you can also do this in the first quarter of next year. But I like just getting it done sooner rather than later. And so that's why it's on the list. 


[:[:[:

I reminded of the common doc in top gun. It's like son, your ego's writing checks that your body can't cash. I'm writing checks that you've got to cash. Fantastic. All right. We did an episode. A ways back about the many smart ways you can use health savings accounts. 


First of all, I want to plug that episode. It was great. Second of all, you wanted to say something about HSA is when it comes to end of year tax planning. 


[:is the cap for:ook in January or February of:[:

But it is so check that out and make sure to take advantage of all those 


[:[:[:

Future money grow future money. So it would be a bazillionaire 


[:[:

Requires you to take money out of those accounts. So this would be your traditional employer accounts. 401k is a four, three BS, and it'll also be your individual retirement accounts, SEP IRAs, simple IRAs, traditional IRAs, anything where you defer taxes, not the HSA though, but anything else? You've deferred taxes. 


You will have to take required minimum distributes. 


[:

You got to take it. Maybe you don't need it right now. Could you turn that around into a tax benefit by thinking about a charitable avenue or some other mechanism of using it to defray your taxes? So it doesn't cost you as much. 


[:[:[:[:[:[:[:

So I just put it out there, like you'd have to do your own research on it just to make sure it makes sense for you. But if you have RMDs and you're charitably minded, definitely look into this option because you can save a lot on taxes. 


[:

I don't know even if my wife and I are both getting W2 income, we're employed. We're not an imminent risk of losing our jobs unless I, run a foul of the FCC, for example. Even then I just find that I'm a little bit more risk averse earlier in the year. And it's right around now as I enter the fourth quarter of the year that I start to check in a little bit and see, all right, have I given as much to charity as I intend to as my yearly target is. 


And have I done these other things in terms of savings? Are you finding that among your clients that they're they've been a little risk averse given the pandemic uncertainty and they're needing to check in and catch up. 


[:

So do I feel like a giveaway a little bit more? Yeah. Maybe, based on that and based on the time of year between Thanksgiving and the holidays and everything else, I think it's a very natural time. So we have. So you add all that together and it's a natural time to have those thoughts and those conversations and figure out, again, if it makes sense for you, I have clients across the board, right? 


Some, very interested in doing lots of charitable giving. I can tell you stories of saving tens of thousands of dollars by various tax strategies and then people that, aren't as interested in it. It's all good, but it's something to just check in at the end of the year. 


If it makes sense for you. 


[:[:[:[:

You still have to itemize if you're doing a lot of charitable giving and other itemized deductions, which we can talk about, but the We want to encourage the government, wanted to encourage more charitable giving during the pandemic. So they made a change that individuals can donate $300 and get that straight off the top. 


So again, tax saving right above the line, which is saving. Whatever your marginal tax rate, 22%, 24% of that. And for families, you can give up to 600. So you don't have to itemize to get that 300 or 600 for a family in terms of a charitable deduction. So I definitely would look at that amount, towards the end of the year, 


[:

is creeping up leaves are turning maybe time to think about how I've done, who repent and, is that kind of thought process, especially when it comes to things like charitable giving. 


But I imagine also some of these. Tax strategies on your list. How are those things affected when we've been in a relatively strong stock market year? Like we've been in this year? What, how does that change? People's thinking. 


[:

And so when you feel a little bit better and a little bit more well, Then, yeah, these conversations flow a little more easily. There's definitely years where there's a downmarket and people just don't feel as rich. And so not willing to, give away as much. So I think, again, that's all very personal of course, first and foremost, but also very natural and it's good to feel your overall wealth, not just, Hey, this is my income and here's, what's my accounts, but take us take stock of everything. 


When you're looking at your net worth and your. 


[:[:

It's very easy with a click of a button to donate. To essentially your own little private foundation. So it's not actually gone to charity yet. It's an account that you own and manage called a donor advised fund they're at fidelity and Vanguard and Schwab all had this open, that, that type of account, okay. 


With a click of a button and then you can transfer appreciated assets like your stock straight from your Schwab portfolio. Y'all donate a couple of shares of Tesla. They've gone. They've done pretty well over to the donor advised fund. So that might be a few thousand. And you get to deduct it off your taxes this year as if you gave it to charity. 


So those couple of thousand dollars, even though it's still under an account under your control in your name it's as if you gave it to charity in terms of taxes. Okay. And then sometime in the future next year, or the following year, 10 years from now, you could actually give it to a charity. It eventually does have to end up at a public. 


It could be churches could be national organizations, local organizations. You can look up, make sure whatever you're interested in donating to make sure it's on the approved list, but thousands and thousands of nonprofits, eventually you will have to donate that money to a nonprofit, but in the meantime, it can be under your control. 


Okay. So that's how the donor advised fund works. 


[:

I don't think anyone needs a Matt Robinson 


[:[:[:

Harvesting. The flip side is also true. Okay. You can take a, no one really talks about this mat, but if you have a low income year, you can sell almost $80,000 worth of gain and pay zero capital gains. All right. So say you took the year off mat and you didn't make any money. You could go ahead and in your brokerage account, sell things that have appreciate. 


Okay. Reset the basis seldom. Oh, I had $40,000 worth of gain in this index fund. You sell it and you don't pay any capital gains. Okay. So tax gain harvesting. So again, when you're in a low income tax bracket, that's what you'd want to do. Just take advantage of that. 


[:

Talking about like selling $80,000 with something that's a lot of money. I own almost anyone's reckoning, but you're saying that the benefits are really there and it's really, people should pay attention to this. 


[:be additional income here in:[:[:change from last year and in:[:[:

Right? If you find yourself in a situation where you just had a big stock IPO, Big stock options year people, there's thousands of thousand people that made millions of dollars this year as a special year, in their work or their income. 


Those are the ones that yeah, you can take a look at it, if that's interesting to you. 


[:[:[:[:

Subscribe to my podcast

apple
Google
spotify
stitcher

Subscribe to my podcast

apple
Google
spotify
stitcher