Top 10 Year-End Tips

Patrick Cote |

It’s that time of year again! While we are in the midst of enjoying the holiday season, the last thing many of us want to do is to think about taxes and finances.  However, taking a few minutes to focus on some specific areas can make a big difference.

With that in mind, we prepared a list of 10 key items to focus on before 12/31.

1.  Take any RMDs (Required Minimum Distributions)
If you have inherited an IRA or you are over age 72, it is very important to ensure that you take your RMDs by 12/31/2021.  If you just turned 72 this year, you have until 4/1/2022 to take your first RMD.  The tax penalty for missing an RMD is 50%.

2. Roth IRA conversion
If your 2021 taxable income is lower than it would typically be for you, this might be a good year to convert your traditional/rollover IRA to a Roth IRA.  By doing so you will be able to take advantage of the lower tax rates that apply to lower taxable income.

3. Buy a magical hat for your snowman
Frosty only comes out once a year, so finish the look with a button nose, pipe, and two eyes made out of coal.

4. Maximize your 401k contributions
It is quite late to make adjustments, however it is important to make sure that you don’t leave any money on the table.  You will want to make sure that you contribute at least up until the maximum your employer will match, often 4% to 6% of your pay.

5.  Make a 529 contribution for your kids or grandkids
The contributions can be up to $15K per donor per beneficiary.  Most states offer a state income tax deduction or credit for 529 deductions, so be sure to check what you are eligible to receive.

6. Celebrate and be grateful
During this busy season, it’s easy to lose touch with what we most appreciate. Take a moment and be grateful for your health, family, friends and the roof over your head.

7.  Tax-Loss Harvesting
The good news is that with the stock market gains this year, many stock investments have unrealized capital gains.  If you do have some investments that have unrealized capital losses in a taxable brokerage account, this could be a good year to realize those losses.  You can deduct up to $3K in capital losses each year. 

8.  Plan out any other significant gifts you would like to give
The annual gift tax exclusion is $15K per recipient in 2021, or $30K per recipient from a married couple.  The 529 contributions count as gifts, although you can make gifts to other family members or loved ones as well. 

9. Plan a trip for 2022
As the world continues to re-open, nothing helps make spirits brighter than a vacation on the calendar.  Plan a trip for 2022 – maybe try someplace new or return to a spot you visited when you were a child.

10. Relax, go for a walk, and enjoy the season
Take a few moments to enjoy a cup of coffee on the couch, take your dog for an extra long walk on a sunny day, and just enjoy the season.  We’ll be flipping the page on a new year soon!