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Year-End Tax Strategies to Consider

Year-End Tax Strategies to Consider

December 13, 2022
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These proactive moves could help lower your tax bill

In an ever-changing tax landscape, having a strategic financial plan is more vital than ever. At Willis & Machnik, we’ll help protect you from potential risks and navigate life’s unexpected scenarios – all while maximizing investment opportunities and minimizing your tax liabilities.

Although 2022 is coming to a close, there is still time to reduce your tax bill. As the new year approaches, here are some year-end strategies to consider:

Tax-Loss Harvesting

Tax-loss harvesting can be used to offset capital gains by selling an asset at a loss. While no one wants to see their investments lose value, you can recoup some of that loss – and lower your tax bill – by selling assets that have performed below their purchase price. Tax-loss harvesting can be done at any time during the year when opportunities present themselves, but many investors prefer to wait until the end of the year to understand portfolio performance and tax implications.

Qualified Charitable Distributions

Qualified Charitable Distributions (QCDs) are also called IRA charitable distributions or IRA charitable rollovers. They allow people who are 70½ and older to donate up to $100,000 total to one or more charities directly from a taxable IRA instead of taking their required minimum distributions. From a tax perspective, a QCD can benefit donors by lowering their income taxes.   

Maximize Retirement Accounts

Put your employer-sponsored 401(k) to work by contributing the maximum allowable amount. Not only will you benefit from employer matching opportunities, but also contributing as much as you can reduces your taxable income. 

Additionally, a Roth IRA conversion may work to your advantage if you expect to be in a higher tax bracket during retirement. A market downturn allows for converting a larger portion of an IRA and enjoying tax-free growth. However, a Roth IRA conversion requires careful consideration of drawbacks and benefits – such as a higher tax bill this year but long-term tax gains in the future. Contact our team of experienced advisors to discuss whether this strategy is right for you.

Bunch Charitable Gifts

Bunching or combining two or more years of contributions into one tax year can increase your itemized deductions for that year. Then, in subsequent years, you can have little or no charitable giving and take the standard deduction. This strategy is typically best for those who make sizeable charitable contributions.

Every family and business has unique financial needs. Our team will work directly with your tax professional to make sure our strategies align, so you can keep more of what you earn. At Willis & Machnik, we are your complete wealth management partner. Contact us to learn more about how we can support your financial goals.