{"id":39191,"date":"2023-11-22T11:47:58","date_gmt":"2023-11-22T16:47:58","guid":{"rendered":"https:\/\/www.saratoga.com\/saratogabusinessjournal\/?p=39191"},"modified":"2023-11-22T11:47:58","modified_gmt":"2023-11-22T16:47:58","slug":"business-report-smart-tax-moves-year-end-harvesting","status":"publish","type":"post","link":"https:\/\/www.saratoga.com\/saratogabusinessjournal\/2023\/11\/business-report-smart-tax-moves-year-end-harvesting\/","title":{"rendered":"Business Report: Smart Tax Moves: Year-End Harvesting"},"content":{"rendered":"<figure id=\"attachment_39192\" aria-describedby=\"caption-attachment-39192\" style=\"width: 212px\" class=\"wp-caption alignleft\"><img loading=\"lazy\" decoding=\"async\" class=\"size-medium wp-image-39192\" src=\"https:\/\/www.saratoga.com\/saratogabusinessjournal\/wp-content\/uploads\/sites\/48\/2023\/11\/burnell-vc-212x300.png\" alt=\"\" width=\"212\" height=\"300\" srcset=\"https:\/\/www.saratoga.com\/saratogabusinessjournal\/wp-content\/uploads\/sites\/48\/2023\/11\/burnell-vc-212x300.png 212w, https:\/\/www.saratoga.com\/saratogabusinessjournal\/wp-content\/uploads\/sites\/48\/2023\/11\/burnell-vc.png 432w\" sizes=\"(max-width: 212px) 100vw, 212px\" \/><figcaption id=\"caption-attachment-39192\" class=\"wp-caption-text\">Matthew Burnell, financial paraplanner, HK Wealth Management Group.<\/figcaption><\/figure>\n<p>BY MATTHEW BURNELL<\/p>\n<p>\u201cIt\u2019s that time of the year, and I don\u2019t mean just the holiday season, even more exciting it\u2019s time for year end \ufb01nancial and tax planning! The following are some topics that you may want to discuss with your tax accountant or \ufb01nancial advisor.<\/p>\n<p>One year end strategy is \u201ctax loss harvesting\u201d. You or your \ufb01nancial professional may be selling equities in non-retirement accounts throughout the year. If selling at a price higher than the purchase price, you have a capital gain on the sale which is taxed according to your income bracket and the amount of time the security was held. With the goal of reducing tax on capital gains, you can look to o\ufb00set some of the gains by selling other securities in your portfolio that have a loss.<\/p>\n<p>This should be done strategically considering the investment philosophy of your portfolio. Note, repurchasing the same or substantially identical security that you sold for a loss within thirty days, or the loss may be considered a \u201cwash sale\u201d and disallowed.<\/p>\n<p>Now may also be a time to review your withholding on your salary heading into the new year. If you keep owing a large tax bill in April and would prefer to pay this over the course of the year instead, and if applicable reduce interest and penalties your withholding percentage may not be aligned with your income tax rate. For example, if your e\ufb00ective Federal Tax Rate is 25% and the withholding on your paystub is 15%, there is a 10% gap here and you will likely owe taxes in April if you have not been making estimated payments. You can adjust your withholding on form W4 provided by your employer.<\/p>\n<p>Maxing out your retirement contributions is a way to reduce taxable income as well as save for retirement. If you are using a pre-tax plan such as a 401K or 403(B). The maximum contributions for 2023 to a 401K is $22,500 plus an extra $7,500 if over the age of \ufb01fty. For example, a client is over age 50 and earns $120,000. If they contribute $30,000 to a 401K that reduces taxable income (aside from FICA taxes) to $90,000 for the tax year. So, you have deferred taxes on this $30,000 as well as set aside money for retirement that can grow over time.<\/p>\n<p><span class=\"\"><b><span class=\"s1\"><span class=\"s2\"><!--more--><\/span><\/span><\/b><\/span>At a certain age, depending on date of birth an individual is required to start taking distributions called required minimum distributions (RMD\u2019s) on their traditional retirement accounts. An RMD is calculated for each account by dividing the prior December 31 balance of that IRA or retirement plan account by a life expectancy factor that the IRS publishes. This is important because if the RMD is not taken, late or insu\ufb03cient, then a 25% (or 10% if made up in two years) excise tax may be assessed on insu\ufb03cient amount. If you do not need the money and do not want to pay tax on an RMD, there are options such as making a Quali\ufb01ed Charitable Distribution directly from your quali\ufb01ed account to a public charity not to exceed $100,000 in a year and removing this distribution from your taxable income.<\/p>\n<p>Another strategy is to look at converting quali\ufb01ed assets such as a 401(K) or traditional IRA into a Roth IRA. Note, that this is a taxable event, so it is prudent to work with your tax advisor to determine the tax implications and devise a strategy for doing this strategically over time to consider the tax consequences. Roth IRA\u2019s may be bene\ufb01cial in the long haul in that unlike traditional IRA\u2019s, Roth IRA\u2019s are not subject to RMD\u2019s and are not taxed at distribution if over age 59.5.<\/p>\n<p>Implementation of the SECURE Act materially increased the standard deduction and limited certain itemized deductions such as state and local taxes. Taxpayers either take the standard deduction or itemize whichever is more bene\ufb01cial from a tax standpoint. With a bigger standard deduction to.&#8221;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>BY MATTHEW BURNELL \u201cIt\u2019s that time of the year, and I don\u2019t mean just the holiday season, even more exciting it\u2019s time for year end \ufb01nancial and tax planning! The following are some topics that you may want to discuss with your tax accountant or \ufb01nancial advisor. One year end strategy is \u201ctax loss harvesting\u201d. [&hellip;]<\/p>\n","protected":false},"author":89,"featured_media":39192,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[9,46],"tags":[],"class_list":["post-39191","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business-reports","category-year-end-tax-planning"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v23.4 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\r\n<title>Business Report: Smart Tax Moves: Year-End Harvesting - Saratoga Business Journal<\/title>\r\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\r\n<link rel=\"canonical\" href=\"https:\/\/www.saratoga.com\/saratogabusinessjournal\/2023\/11\/business-report-smart-tax-moves-year-end-harvesting\/\" \/>\r\n<meta property=\"og:locale\" content=\"en_US\" \/>\r\n<meta property=\"og:type\" content=\"article\" \/>\r\n<meta property=\"og:title\" content=\"Business Report: Smart Tax Moves: Year-End Harvesting - Saratoga Business Journal\" \/>\r\n<meta property=\"og:description\" content=\"BY MATTHEW BURNELL \u201cIt\u2019s that time of the year, and I don\u2019t mean just the holiday season, even more exciting it\u2019s time for year end \ufb01nancial and tax planning! 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