Year-End Tax Strategies

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Year-End Tax Strategies

As 2021 comes to an end, you can use a few strategies below to help you when you begin to file your taxes next year. Below are some things to consider. For more information about tax strategies, visit Forbes or Broadridge Advisor Solutions.


1. Defer Income to Next Year


•  It's difficult to postpone your salary, but you may be able to defer a year-end bonus into next year if it’s standard practice for your                       company.

•  If you are self-employed, you have more leeway of billing into late December to ensure payment isn’t received until after the first of the           year.

•  Remember, it only makes sense to defer income if you think you will be in the same or lower tax bracket.

2. Accelerate Deductions


•  Spend money on expenses that will generate a tax deduction now rather than next year. If you itemize deductions for medical expenses,          qualifying interest, and state taxes before the end of the year (instead of paying them in early 2022) it could make a difference on your              2021 return.

3. Support Your Favorite Charity


Tax deductible donations can reduce taxable income only if they meet certain criteria.


•  Make sure you’re donating to a tax-exempt organization as defined by section 501(c)(3) of the Internal Revenue Code.

•  An organization can be nonprofit without 501(c)(3) status, which can make it tricky to ensure your charity of choice counts.

•  You can verify an organization’s status with the IRS Exempt Organizations Select Check tool.

•  Ask the charity how much of your contribution will be tax-deductible.

4. How to Know if You’ll Owe Federal Income Tax and When to Bump Up Withholding


•  You can always increase withholdings on your W-4 if you think you’ll owe federal income tax. You can run a quick estimate by using this            calculator. You’ll need your most recent pay stub.

5. Contribute the Maximum to Retirement Accounts


In order to reduce your 2021 taxable income:


•  Consider maximizing your pre-tax contributions by increasing your 401(k) through your employer-sponsored retirement plan or                          traditional IRA.

•  Make 2021 contributions to an employer plan until it closes at the end of the year. For 2021, you can contribute up to $19,500 to a 401(k)          plan ($26,000 if you’re age 50 or older) and up to $6,000 to traditional and Roth IRAs combined ($7,000 if you’re age 50 or older).

•  You have until April 15, 2022, to make 2021 IRA contributions. (Roth contributions are not deductible, but qualified Roth distributions are        not taxable.)

6. Required Minimum Distributions (RMDs) are Back in 2021


•  In 2020, RMDs were waived but are back for 2021. If you are age 72 or older, you must take RMDs from traditional IRAs and employer-                  sponsored retirement plans (an exception could be if you’re still working for the employer). Failing to take RMDs can be costly.

7. Weigh Year-End Investment Moves


Tax considerations should never be the primary driver of your investing decisions but there are steps you can take at year-end to minimize any tax impact of your decisions.


•  If you have capital gains from selling securities at a profit and have no tax losses carried forward from previous years, you can sell losing         positions to avoid being taxed on some or all of those gains.

•  Any losses above the amount of your gains can be used to offset up to $3,000 of ordinary income ($1,500 if your filing status is married             filing separately) or carried forward to reduce your taxes in future years.

8. Watch Your Flexible Spending Accounts


•  Flexible spending accounts, also called flex plans, let employees pay into a special account and avoids income and Social Security taxes.       The catch is you have to use it or lose it.
•  Make sure you check with your employer to see if there is a grace period, if not, you’ll have to use the funds by the end of the year.

9. Review Your Last Tax Return


•  If you received a surprise tax bill from last year or feel like you should have received more deductions, find out why so you can change it.         Check to see if there were deductions you took in previous years that you didn’t take last year. Have your dependents changed? If your             situation didn’t change, the tax law could have, so be up to speed in order to make the appropriate changes.

For more information about tax strategies, visit Forbes or Broadridge Advisor Solutions.


This article has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.

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