2021 Individual Year-End Income Tax Planning

Published by Heather on

2021 Individual Year-End Income Tax Planning

As we approach the end of another year, it is important to take some time to think of planning moves that may help lower your income tax costs this year.

Below we have compiled a list of items that may be helpful if taken into account before the end of the year. Not all will apply to you but many may. Please contact us to discuss the benefit and your eligibility before you consider taking any action to save or defer taxes.

  • Consider any opportunity to accelerate or defer income and/or deductions between tax years.
  • 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 charitable contribution deduction ($300 single, $600 married) is available for cash contributions made to a charity in 2021.
  • Charitable contributions of appreciated securities can avoid income tax on the gain from appreciation and also provide a charitable deduction if claiming itemized deductions.
  • Consider timing the recognition of capital losses on the sale of securities before year-end to offset current year taxable gains.
  • Maximize your use of employer-sponsored or self-employed retirement accounts.
  • 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 gifting a portion of your RMD directly to a charity, especially if you can no longer itemize.
  • Make gifts sheltered by the annual gift tax exclusion of $15,000.
  • A 20% deduction may be available for your rental real estate or other self-employment income. Many limits and exclusions apply.
  • Taxable unearned income of your minor children may provide a means of sheltering some income from taxation and help you achieve some estate planning goals. But beware the kiddie tax!

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 tailor a tax plan that will work best for you.