Yes A checkmark with a circle around it close
closeup view of a digital market graphs

Investment Insights

Fourth Quarter 2021


It’s not too early for year-end planning

When it comes to taxes, you may have a number of strategies available to choose from between now and year-end to help manage how much money the IRS receives. Take some time now to consider this checklist of potential tax-saving strategies for the coming months:

In October:

  • Review your portfolio with your financial advisor to help ensure your allocation still aligns with your goals.
  • Ask your financial advisor for a realized and unrealized gain/loss report to assess the income and/or capital gains you should expect.
  • For tax planning purposes, determine whether the 0%, 15%, or 20% capital gains tax rate will apply to you and whether or not adjusting the timing of capital gains recognition makes sense.
  • Meet with your tax advisor to prepare preliminary tax projections and evaluate whether to defer income into next year or accelerate expenses into this year.
  • Determine whether adjustments are needed to tax withholding or estimated payments.
  • Set up a SIMPLE/safe harbor 401(k), if applicable.

In November:

  • Create or add to your education savings program for children or grandchildren.
  • Review your beneficiary designations and make any necessary adjustments due to life changes (for example, birth of a child or grandchild, marriage, divorce, death, etc.).
  • Develop a plan to complete charitable and family member gifts by year-end, including opening accounts and depositing contributions. The annual gift tax exclusion amount for 2021 gifts to individuals is $15,000.
  • Review your Medicare Part D choices if you receive Medicare benefits; the window for enrolling or changing plans is October 15 to December 7.
  • Consider funding a flexible spending account (FSA) and/or a health savings account (HSA), if applicable, during your employer’s annual benefits enrollment period.
  • Review your insurance coverage to make sure it’s adequate for your needs.
  • Review tax-loss selling strategies. If you want to realize a capital loss for tax purposes while keeping an exposure to the depreciated sector or security, remember that November 30, 2021, is the last day to double up a position (purchase additional shares to replace those you want to sell at year-end) to help avoid a wash sale.

Before December 31:

  • Maximize your contributions to your employer retirement accounts.
  • Remember that for tax purposes, the trade date, not the settlement date, determines the year of the sale and recognition of any gain or loss in most situations when selling securities you own. Trades executed on or before December 31, 2021, will be taxable events for this year.
  • Take required minimum distributions (RMDs) if you’re age 72 or older.1 Discuss with your tax advisor the suitability of qualified charitable distributions (QCDs).
  • Complete any Roth IRA conversions.
  • Determine if now is the time to exercise or disqualify any company-granted stock options.
  • Prepare for filing tax returns by organizing records or receipts for income and expenses.
  • Take precautions to avoid tax-related identity theft; if you suspect that you’ve received a scam letter, phone call, or email, contact the Treasury Inspector General for Tax Administration at 1-800-366-4484.
  • Make an appointment to talk with your local Social Security Administration office early in the year if you plan to retire or will reach full retirement age for Social Security in 2022.
  • Remember that your Traditional IRA contribution may be tax-deductible and the deadline to contribute to either a Traditional or Roth IRA for 2021 is April 15, 2022.
  • During 2020, if you took a penalty-free distribution prior to age 59½ from an IRA or retirement plan under the CARES Act, keep in mind that:
    • You have the option to spread the taxable income over a three-year period
    • You can repay any or all of the distribution to a retirement account over three years
    • Repayments are not subject to retirement plan or IRA contribution limits

Although December 31 is the technical date these activities need to be completed for tax purposes, they will need to be put in process well in advance of December 31 to implement by year-end.

Our firm does not provide tax or legal advice.

1 Beginning with the 2020 tax year, the age to start RMDs was modified from 70½ to 72. This change did not affect individuals who turned age 70½ on or before December 31, 2019.