Year-end Strategies for an Uncommon Year
December 11, 2020

Capital Gains
To avoid capital gains taxes all together, you may want to think about donating appreciated stock when making your year-end charitable gifts.
Roth Conversion
Required minimum distributions (RMDs) were waived for 2020 by the CARES Act, and if you were one of those who did not have to withdraw this year, you may want to consider converting a portion of your traditional IRA to a Roth IRA. Converting to a Roth IRA will reduce your RMDs in the future and your Roth IRA funds can grow tax free for years to come. Converting an IRA to a Roth IRA, does trigger ordinary income taxes on the withdrawal amount, but you may have already been paying estimated tax payments that assumed you would be taking an RMD in 2020. If that’s the case, you may have already paid in taxes that fully cover a Roth conversion. Be sure to check with your tax advisor how a Roth conversion will work for you.
Charitable Giving
This year has been especially hard economically for so many people around the world. As we begin the holiday season you may be thinking about sharing even more this year with the people and causes that are important to you. When planning your charitable commitments, consider these strategies:
Cash Donations
Under the CARES Act, individuals who do not itemize on their income taxes, can still get an extra deduction of up to $300 for donations made this year to qualified organizations.
Additionally, if you choose to make cash donations in 2020, you may deduct them up to 100% of your adjusted gross income. This is up from 60% of AGI in previous tax years. Any charitable contributions made in excess of this, can provide future deductions to be carried forward for five years, subject to the standard limitations.
Qualified Charitable Distributions from your IRA
Many of you previously used your Required Minimum Distributions (RMDs) to fulfill your charitable plans, thus avoiding ordinary income taxes on the withdrawal. This year even though RMDs were waived, you can still distribute up to $100,000 from your IRA to qualified charities. You will not receive a tax deduction, but you will reduce the balance in your IRA and this will lead to a lower required distribution next year.
In a year filled with so much uncertainty, we know that many of you are looking for reasons for hope and joy this holiday season. Year-end financial planning may not always top your holiday list, but this year’s unique opportunities are worth reviewing, and maybe the savings opportunities will help start the holiday season with a smile.