2021 Year-End Tax Planning Tips

There is a lot of uncertainty with tax planning this year. The U.S. House of Representatives has passed the Build Back Better Act that includes a number of substantial changes to the tax code. It is still to be seen if the Senate will pass a similar bill and ultimately what the final bill passed by both might look like. With that, there are no certainties for what these changes will look like when it comes time to file.

Despite the uncertainty, there are still a few items that should be addressed prior to the end of 2021. The list below is not all-encompassing and may not be relevant for all taxpayers, but they are good areas to consider. 

Year-end tax planning

  • Charitable donations
    • The holiday season offers a great time to make an impact with organizations that matter to you. The 2020 CARES Act addition of a $300 deduction without itemizing remains in effect for 2021.
  • 2021 total income
    • Now is a great time to evaluate your income for the year. There are a number of things that have limitations based on income level, including the child tax credit and Roth IRA contributions. If you saw a significant increase from 2020, your tax situation may have changed in ways you do not expect.
  • Evaluate your capital gains
    • Discuss with your financial advisor how your capital gains have been for 2021. If you have substantial losses, you may want to sell gains that will be offset by those losses. And vice versa, if you have gains, you may want to sell losing stocks to reduce your tax bill. Be careful when selling stocks for a loss, if you purchase the same stock within 30 days, the loss will be disallowed for tax purposes. 
  • Required Minimum Distributions (RMDs) return for 2021
    • RMDs were not required during 2020 as part of the CARES Act. For 2021, they are required and need to be taken by the end of the year.

 At Malloy, Montague, Karnowski, Radosevich & Co., P.A. (MMKR), we stay on top of the ever-changing tax laws so that you don’t have to. We will continue to monitor the potential tax law changes as they work their way through Congress. If you have questions regarding year-end planning and the impact to your 2021 taxes, call our team today to schedule a consultation with one of our accountants.