Year-end Tax Considerations

Tax Planning

Nov 29, 2023

With Thanksgiving behind us, the holiday season is now in full effect. If this is like any other year, we’ll blink, and the ball will be dropping. With a short amount of time left in the year, there are some actions you can take in December to lower your tax bill for the year. This article will lay out some ideas for you to consider before the holiday season overtakes your focus.

Tax Loss Harvesting

Simply put, tax loss harvesting is taking losses to offset capital gains and lower your tax bill. There may be some losers in the portfolio that can potentially be used strategically. It is a lot more complex than it sounds. If you are taking a loss in a fund and buying another fund, you have to make sure that it is not an “identical” fund. You can’t buy the same holding back for 30 calendar days or the loss is not realized. You also have to understand that only $3000 can be used against earned income. If your losses exceed your gains plus $3000, then you can carry the loss forward and use it in future years. We would strongly recommend that you consult with a professional before you employ this strategy.

Roth Conversion

Just like the tax loss harvesting, a Roth Conversion is not that simple. The tax bill can still be substantial. You have to do some planning and determine what tax rate you would pay on the conversion if it moves you into a higher tax bracket. Most importantly, you have to be comfortable that investing in the taxes now will pay off in the long run. We wrote an article that goes into more detail about a Roth IRA. You can find that article by clicking here. Again, we would recommend consulting with a professional before taking any action.

Charitable Donations

There are two investment related charitable giving strategies we’ll focus on here. One is to donate highly appreciated stock. You can take the tax deduction on the donation and not pay taxes on the gains. Some conditions and limits apply and may want to consider working with an advisor to use a donor-advised fund, or DAF.

If you are over the age of 73 and are taking required withdrawals from your IRA that you don’t need, you can donate those directly to a charity and avoid paying the taxes on the distribution of up to $100,000. If you have a favorite charity and are fortunate enough to not need the required distributions from your IRA, this can be a very effective strategy.

Although it is not charitable, it is worth mentioning that you could gift up to $17,000 to any person without having to report it to the IRS. Married couples can give up to $34,000. Many families utilize annual gifts to transfer money to their children and grandchildren.

Required Distributions

While this isn’t really a tax saving exercise unless you employ the strategy above, it is worth checking to making sure you took your required minimum distribution for the year. If you are a beneficiary to an IRA, you have to take a required minimum distribution if you inherited the IRA before 2020 or if the person you inherited the IRA from was taking required distributions. If you inherited an IRA (or Roth IRA) in 2020 or later, you have 10 years to empty the account. It would be prudent to put a strategy in place and start taking some withdrawals now to avoid a large taxable event in 10 years.

Retirement Account Contributions

Do you have extra money that you can add to your IRA or Roth IRA to hit the maximum contribution for the year? You technically have until the tax filing deadline to make these contributions, but it is something to think about now. Can you max out your workplace retirement plan or add a little more in the last month of the year? Maybe you are expecting a bonus and can add additional funds from there.

Estimated Tax Payments

For business owners, the final installment of your quarterly estimated tax payments is due on January 16, 2024. You are required to pay the lesser of 90% of your tax bill for the current year or 100% of your tax shown on your prior year return before this deadline to avoid a penalty. If your Adjusted Gross Income (AGI) is over $150,000, it is slightly altered. You must pay the lesser of 90% of your tax bill for the current year or 110% of the tax shown on your prior year return. It is worth checking to ensure that your payments are accurate, and you don’t need to increase your final payment.

We all need to pay our fair share in taxes even though we don’t necessarily enjoy it. It is worth exploring opportunities to manage our tax bill and make sure we aren’t paying more than we need to. As we mentioned multiple times, we would recommend that you consult with a professional before acting on any of these ideas.


Our team of advisors are not tax or legal professionals. This information if for information purposes only and should not be relied on as tax or legal advice. You should consult with your tax or legal professional before making any tax and or legal related investment decisions.

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