Year-End Tax Planning & Personal Finance Tips

Dec 7, 2022

With the end of the year approaching, we’d like to give you a heads up on some year-end personal finance and tax tips.

  1. Middle Class Tax Refund (CA Residents Only): This is a one-time payment to California residents who earned under $500,000 in 2020. If you qualify, you will automatically be mailed a preloaded debit card worth up to $1,050. It is administered by Money Network, and is not a scam. To learn more and determine your eligibility, click here.

  2. Purchase Inflation Bonds: These are cash-like holdings that you buy directly from the US Treasury, currently providing an interest rate of 6.89% (with no state income tax). You have until December 31st to purchase them, can buy up to $10,000 worth each calendar year. If you have the cash, this is an unbeatable interest rate. To learn more, click here.

  3. Maximize Savings That Lower Your Taxes:
    • Pre-Tax Accounts (like a 401k or 403b): You can contribute up to $20,500 if you are under age 50. If you are 50 or older, you can contribute up to $27,000.
    • After-Tax 401(k): If you’ve already maxed out your pre-tax 401(k), and your company offers an after-tax 401(k), consider contributing. To learn more about these great savings vehicles, click here.
    • Health Savings Accounts: You can contribute up to $3,650 per year for individuals, or $7,300 for families (+$1,000 if age 50 or older).

  4. Tax-Loss Harvesting: If you own investments in a taxable account that are currently at a loss, consider selling those positions. With that loss, you can sell other positions that have a gain. The loss then offsets the gain, which lowers your capital gains tax. Or if you have no investments with a gain, you can simply apply $3,000 of the loss to lower your taxable income. We have been doing this throughout the year for clients with managed accounts.If you own crypto currency, this is even more relevant. With the current IRS classification, there are no rules against “wash sales.” This means you can sell your crypto, “harvest” the loss, and immediately buy it back. There would be no change in your position, but lower taxes.

  5. Gift Tax Exclusion: You can gift up to $16,000 per person per calendar year. This is mostly used for intra-family gifting. The deadline is December 31st.

  6. Charitable Giving via a Donor-Advised Fund: You can donate investments and get an immediate tax deduction for the fair market value of what you donated. You then choose when and where to donate at your discretion. If you’re charitably minded, these are a great tool. To learn more, click here.

  7. Required Minimum Distributions: If you have not taken your required minimum distribution from your IRA or Inherited IRA, make sure to do so by the end of the year.

If you have any questions at all please feel free to reach out.

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Disclaimer: Investments are not guaranteed and are subject to investment risk, including possible loss of the principal amount invested. Past performance is no guarantee of future results. All allocations and opinions expressed are as of the date of this presentation and subject to change. The information contained herein does not constitute investment advice or a solicitation. Information obtained from 3rd parties is believed to be accurate, but has not been independently verified.

The opinions expressed in this article are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security. The material is presented solely for information purposes and has been gathered from sources believed to be reliable, however Think Different Financial Planning cannot guarantee the accuracy or completeness of such information, and certain information presented here may have been condensed or summarized from its original source. Think Different Financial Planning does not provide tax or legal advice, and nothing contained in these materials should be taken as such. As always please remember investing involves risk and possible loss of principal capital. Advisory services are only offered to clients or prospective clients where Think Different Financial Planning and its representatives are properly licensed or exempt from licensure. No advice may be rendered by Think Different Financial Planning unless a client service agreement is in place.

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Past performance is no guarantee of future returns.

The graphs and charts in this commentary are for illustrative purposes only and not indicative of any actual investment. Index returns do not reflect any fees, expenses, or sales charges. It is not possible to invest directly in an index. Stocks are not guaranteed and have been more volatile than other asset classes. Historical returns were the result of certain market factors and events which may not be repeated in the future. Financial professionals are responsible for evaluating investment risks independently and for exercising independent judgement in determining whether investments are appropriate for clients.

This material is intended for information purposes only, and does not constitute investment advice, a recommendation or an offer or solicitation to purchase or sell any securities.

  1. Data from Morningstar. Returns over one year are annualized.

Disclaimer: Investments are not guaranteed and are subject to investment risk, including possible loss of the principal amount invested. Past performance is no guarantee of future results. All allocations and opinions expressed are as of the date of this presentation and subject to change. The information contained herein does not constitute investment advice or a solicitation. Information obtained from 3rd parties is believed to be accurate, but has not been independently verified.

The opinions expressed in this article are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security. The material is presented solely for information purposes and has been gathered from sources believed to be reliable, however Think Different Financial Planning cannot guarantee the accuracy or completeness of such information, and certain information presented here may have been condensed or summarized from its original source. Think Different Financial Planning does not provide tax or legal advice, and nothing contained in these materials should be taken as such. As always please remember investing involves risk and possible loss of principal capital. Advisory services are only offered to clients or prospective clients where Think Different Financial Planning and its representatives are properly licensed or exempt from licensure. No advice may be rendered by Think Different Financial Planning unless a client service agreement is in place.