2020 Individual Year-End Income Tax Planning

Published by Heather on

2020 Individual Year-End Income Tax Planning

As we approach the end of an eventful year, it is important to take some time to think of planning moves that may help lower your 2020 income tax bill.

Below we have compiled a list of items that may help to save or defer taxes if taken into account before the end of 2020:

  • A 20% deduction may be available for your rental real estate or other self-employment income. Many limits and exclusions may apply.
  • Determine if there is any opportunity to accelerate or defer income and/or deductions between 2020 and 2021.
  • Consider bunching your itemized deductions, deferring or accelerating them into a tax year in which you plan to exceed the increased standard deduction.
  • If you will be taking the standard deduction, an additional $300 charitable contribution deduction per tax return is available for cash contributions made to a charity during 2020.
  • Charitable contributions of appreciated securities can avoid income tax on the gain from appreciation and be deductible as an itemized deduction.
  • Consider timing the recognition of capital losses on the sale of securities before year-end to offset current year taxable gains.
  • Conversion of Traditional IRA funds to a Roth IRA in a low tax year may be a good strategy for long term tax-free appreciation on the Roth IRA assets.
  • Consider any tax benefit or consequence to deferring your Required Minimum Distributions into later years as a result of the SECURE Act of 2019. Also, consider gifting a portion of your RMD directly to a charity, especially if you can no longer itemize.
  • Make any gifts sheltered by the annual gift tax exclusion of $15,000.
  • Taxable unearned income of your minor children is no longer subject to higher trust income tax rates and may provide an estate or income tax opportunity.
  • Maximize your use of employer-sponsored or self-employed retirement accounts.

Please visit our website for additional details of the above noted items in addition to other potential year-end planning opportunities. You should examine any tax planning options thoroughly before initiating action. We are happy to discuss these with you and to tailor a tax plan that will work best for you.