Consider these year-end tax measures, regardless of what Congress does

Consider these year-end tax measures, regardless of what Congress does

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Offset investment gains with losses

Filers may consider reaping tax losses, which allows them to offset capital gains with losses. Investors with more losing assets than winners can also deduct up to $ 3,000 from their regular income.

“If you are facing a year of unusually high profits or have suffered huge losses, this can be a good strategy,” said Ashton Lawrence, CFP, of Goldfinch Wealth Management in Greenville, South Carolina.

If you are facing an unusually high income year or have suffered huge losses, this can be a good strategy.

Laurent Ashton

Financial Advisor at Goldfinch Wealth Management

However, those hoping to sell and buy back similar properties should be aware of the so-called blank sale rules, which prevent someone from deducting losses if they buy back “essentially similar” investments within 30 days.

Currently, the wash-sale rules do not apply to cryptocurrencies. But House Democrats want to close the loophole, which goes into effect on Dec.31.

Roth conversion

Another year of volatile earnings prompted tax advisers to discuss so-called Roth conversions with clients.

This strategy allows anyone to convert money in a pre-tax or 401 (k) individual retirement account into an after-tax Roth IRA. Investors must pay taxes on the converted money, but a Roth IRA offers future growth tax-free.

“If you’ve had a particularly lousy 2021, you might be better off eating taxes now,” said enrolled agent Adam Markowitz, Howard L. Markowitz PA, CPA, vice president in Leesburg, Fla.

If you’ve had a particularly lousy 2021, you might be better off eating taxes now.

Adam markowitz

Howard L. Markowitz PA, CPA Vice President

Charitable donation

Philanthropic investors can also consider charitable giving at the end of the year.

With a standard deduction of $ 12,550 for single filers ($ 25,100 for couples filing together) in 2021, the write-off is more difficult to itemize and claim. But many people combine several years of donation, called “pooling,” to erase the standard deduction limit.

Retirees 70 and a half and over may consider qualifying charitable distributions, direct pre-tax IRA payments, which do not count as taxable income.

Anyone 72 years of age and over can use it to meet their minimum annual required distributions.

“Qualified charitable distributions are a valuable giving strategy if you want to donate in a tax-efficient manner,” Lawrence said.

surveillance law

While there are other tax measures to consider, many advisers are watching congressional plans and waiting for final legislation before pulling the trigger on year-end plans.

“It’s very difficult to read the political winds right now,” Markowitz said.

Democrats are weighing in on increasing taxes on income and capital gains, cutting inheritance and gift tax exemptions, among other proposals targeting the wealthy.

“It seems like everything we do for our high net worth clients is being criticized,” Collado said.

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