Wealth Management & Financial Planning

Wealth Management & Financial Planning

Tax Year Ending

There are four critical days concerning your taxes every calendar year. April 15th is the typical day your taxes are due – 2020 was the exception, thanks to Covid. October 15th is when your final tax filing is due.  The two other dates are apparent but often overlooked. The first day of the year is when you can begin making contributions to your retirement accounts. The last day of the year marks the final time to alter your annual tax return.

A general rule of thumb is to fund your retirement accounts as early in the year as possible – especially if you are using Roth IRA’s – but charitable gifting can happen at any time. Charities will tell you that the fourth quarter is when many blessings arrive just in time for people to get the tax deduction.

There are other things to consider. If you are paying for higher education now or planning to in the future, do not forget the Indiana College Choice 529 program. Their website is straightforward to navigate, and the tax benefits can be substantial.

If you have investment accounts that are not tax-deferred, you may benefit from examining your capital gains report. Compare the capital gains already realized for this tax year and compare the amount of gains or losses that have yet to be recognized. There are several moving parts regarding this strategy.  As always, consult your professional advisor and take this suggestion as a general rather than a specific direction.

Capital gains can be either short-term or long-term.  Short term capital gains are subjected to your highest marginal rate for any given year. Long term capital gains are created by owning an investment for longer than one year and are currently taxed at a lower rate.

You can sell investments in your account that have a capital loss. In other words, the value today is less than your purchase price. This concept is tax-loss harvesting. By selling the losers, you recognize a capital loss that will offset your capital gains. You can deduct $3,000 of losses every year above your capital gains: the higher your tax bracket, the more beneficial that strategy works. Remember, this has no impact inside of your retirement accounts.

Depending on your situation, you might find yourself in a lower tax bracket this year. We examine income variability for the families we serve as all years are not the same. You may want to intentionally recognize gains or income this year due to being in a lower tax bracket than usual. This scenario may be right for you this year, especially with Covid interruptions. Again, consult your advisor.

Taxation is tricky, but if you invest in retirement accounts or other brokerage accounts, it will behoove you to know the options and the pitfalls of taxation. The end of the year is near. Don’t miss the opportunity to maximize your financial situation.


Joseph A. Clark is a Certified Financial Planner and Managing Partner of The Financial Enhancement Group, and an SEC Registered Investment Advisor. Contact Joe at yourlifeafterwork.com or 800-928-4001. Securities are offered through World Equity Group, Inc. Member FINRA/SIPC. Advisory services can be provided by the Financial Enhancement Group (FEG) or World Equity Group. FEG and World Equity Group are separately owned and operated. Tax advice provided by CPA affiliates of the Financial Enhancement Group.

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