Year end opportunities
It is hard to believe how fast this year has gone by. With only a few weeks left, and knowing that the holidays are typically the main focus, there are a few key things you may wish to consider to maximize opportunities before we say goodbye to 2022, including:Tax-loss harvesting
The IRS allows us to offset capital gains with capital losses. That might be one of the few good things that comes with a negative year in the stock market. If you have investments that are down this year, we may be able to use them to offset investments that may have gains. Give us a call to see how we can help determine the best strategy for managing your portfolio in all aspects, including doing so with minimal tax consequences.Taking out all of your Required Minimum Distributions
If you are over 72 years old, Uncle Sam makes us take Required Minimum Distributions of our retirement accounts, including Individual Retirement Accounts so they can tax us. And they are serious! If you fail to take it out before December 31, there is a 50% penalty. We begin this process for our clients in October, but as shocking as it may seem, some clients have accounts held elsewhere. If you have IRAs or retirement plan accounts at another financial firm, either contact them to take out the RMD, or let us know and we may be able to take out more from your IRA accounts held at Smalley Investments.Maximizing retirement account contributions
One of the best ways to save money on taxes and to use the down stock market is to max out your retirement plan contributions. If you haven’t already contributed to the limit of your retirement plan, ask your employer to change your deferral amount for the last few payrolls to get as much as you can into your retirement account. For 401ks and 403bs, if you are under 50, the maximum amount is $20,500 for the year. If you are lucky enough to be over 50, that amount climbs to $27,000.Even if you cannot get a tax deduction for making an IRA contribution, remember that once in an IRA, the earnings grow tax-deferred (or tax-free for a Roth IRA). The limit this year is $6,000 for the youngsters, and $7,000 for those of us over 50.If you own a company, now is a great time to review your retirement plan to see if you are using the best plan for your situation. We can help!Review your other benefits, as well
Don’t forget to consider Flexible Spending Accounts (FSA) and Health Savings Accounts (HSA), as well. If you are eligible for corporate stock options, incentive plans, or executive benefits, now is a good time to review all of your employee benefits.Converting IRA to Roth IRA
Another potential benefit of a down year in the stock market is converting an IRA to a Roth IRA. It is important to understand that when you convert to a Roth IRA, you pay taxes on the amount being converted as if it were income in the year you convert it. The smaller the account value (because of the decline in the stock market), the smaller the tax you would pay on the conversion. Donating to charity
If you itemize your deductions on your taxes, you can potentially receive a tax benefit to making a donation to your favorite charity. Did you know that if you make the donation from your IRA account, you can do so tax-free? Many of our clients use a portion of their Required Minimum Distribution to make a Qualified Charitable Distribution. These are some items to knock off the list in the next few weeks. Next month, I’ll share some New Year’s Opportunities, as well. As always, if you have any questions, please don’t hesitate to contact us. While this is our busiest season, we welcome helping whenever we can. If we don’t have the pleasure of talking before hand, have a wonderful holiday season!Joe, Ryan & Mo
Smalley Investments does not provide legal or tax advice. Please contact your lawyer or accountant with legal and tax questions. If you need a referral, we may be able to help.Securities & advisory services offered through Commonwealth Financial Network, member FINRA/SIPC, a Registered Investment Adviser.