Your Year-End Tax Planning Checklist: Securing Your Financial Future

By Tyler Tilton | October 26, 2023

As the holiday season approaches, it is not just your gift list that deserves attention. Your year-end tax planning checklist is essential this year. Proactive financial experts understand that the months leading up to year-end provide a prime opportunity to make final tax-saving moves that can substantially impact your financial well-being.

To help you prepare for this critical tax year, we have compiled an updated year-end tax planning checklist with strategies to consider. Think of it as your roadmap to tax efficiency, and tailor it to your specific financial situation.

Review Your Required Minimum Distributions (RMDs)

  • If you’re taking distributions, consider how they might affect your tax bracket. In a year with a lower income, you might want to consider taking additional distributions.
  • Age 70 ½: For Births on June 30, 1949 or Earlier
    • Anyone born on June 30, 1949 or earlier should have already started lifetime IRA RMD’s and is bound by the original age 70 ½ RMD rule. Nothing changes with the original SECURE Act or SECURE 2.0. Continue to take your annual RMD’s as normal.
  • Age 72: For Births on July 1, 1949 through and including December 31, 1950
    • Anyone born on July 1, 1949 through and including December 31, 1950 should have already started lifetime IRA RMD’s and is bound by the original SECURE Act RMD age change to 72. Nothing changes with SECURE 2.0. Continue with your existing RMD schedule.
  • Age 73: For Births on January 1, 1951 through and including December 31, 1959
    • Anyone born on January 1, 1951 through and including December 31, 1959 will use age 73 as their IRA RMD age. Note that we need a year to adjust to the new age, and 2023 is that adjustment year. People born in 1951 will turn 72 this year. No RMD is required for these folks in 2023 because the rule is now age 73., and they won’t hit 73 until next year. Accordingly, no one will have their very first IRA RMD in 2023, because this year we are transitioning to the new age.
  • Age 75: For Births on January 1, 1960 or Later
    • Doesn’t begin for another 10 years. We will cross this bridge when we get to it in the next decade.
  • Subsequent RMDs must be taken no later than December 31st each year.
  • Traditional IRA owners can count Qualified Charitable Distributions (QCD’s) towards satisfying your RMD once you reach RMD age. Up to a maximum of $100,000 of your RMD can be donated to a qualified charity.

Consider Tax-Loss Harvesting

  • In a year with market volatility, it’s possible that you’ll have investments with losses. Consider realizing these losses for tax minimization purposes.
  • Note that tax-loss harvesting is only applicable in taxable accounts, excluding IRAs and 401(k)s.
  • Selling a losing investment can help offset gains or establish a deduction of up to $3,000 against ordinary income. Excess losses can be carried forward to future years. Learn more.
  • Ensure that you maintain your long-term investment strategy. After selling a losing investment, replace it with a similar one to remain neutral, allowing you to benefit from any potential recovery.
  • Be aware of “wash sale” rules, which disallow loss deductions if you purchase a “substantially identical” security within 30 days before or after the sale of a security. This rule applies across all your accounts, including 401(k)s and IRAs.

Watch Your Tax Brackets

  • Keep a close eye on your current tax bracket, especially if you’re near the threshold of a higher bracket. Strategize to reduce your taxable income before year-end.
  • Evaluate your various income sources, such as earned income, qualified dividends, and capital gain distributions, to mitigate your overall tax liability.
  • Consider accelerating deductions or deferring income and bonuses where possible.
  • Charitable contributions can benefit the causes you care about and your tax situation. Donating to a charity can reduce your taxable income.
  • Contributing to a traditional 401(k) can help you delay income tax until you withdraw funds in the future, potentially when your income and tax rate are lower.

Evaluate Major Life Changes

  • Major life events, such as welcoming a new family member, moving to a different state, or experiencing job changes, can significantly impact your tax situation. Consult with your financial advisor to understand how these changes may affect your year-end planning.
  • Keep in mind that while moving expenses are no longer tax-deductible for non-military members, relocating can still trigger important considerations for your tax and estate planning, particularly if you’ve moved between states with differing income tax or estate tax regulations.
  • Other life changes, such as births, weddings, and divorces within the family, may necessitate adjustments to your financial plan.

Seek Professional Guidance

  • Given the complexity of the changing tax landscape, we strongly recommend consulting with a CERTIFIED FINANCIAL PLANNER™ and a tax professional to maximize your tax savings.
  • A CERTIFIED FINANCIAL PLANNER™ can help you tailor your strategy to your long-term financial goals. Do you have a specific question for an advisor, we are here to help.

To schedule a consultation with one of our financial advisors for a complimentary consultation on your Year-end Tax Planning opportunities click here.

About Vance Wealth:

Since 2003, Vance Wealth has been a leading financial planning practice dedicated to helping families and businesses achieve their financial goals. We provide innovative and tailored tax and wealth management strategies to address clients’ unique needs and goals. Our mission is to be your trusted partner, guiding you through life’s financial decisions and celebrations. To learn more, schedule a complimentary consultation, and for the latest updates, follow @VanceWealth on Facebook.

The information provided in this article is for educational and informational purposes only and does not constitute investment advice. It should not be relied upon as such and should not be considered a solicitation to buy or an offer to sell a security. Individual investment objectives, strategies, tax status, and investment horizons vary, so it’s essential to consult your attorney or tax advisor to tailor your financial plan accordingly.

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