Slash your 2021 tax bill with these last-minute moves

Slash your 2021 tax bill with these last-minute moves

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Harvesting tax losses or positive factors

Filers could contemplate tax-loss harvesting, which permits them to offset capital positive factors with losses. Buyers with extra dropping property than winners could even deduct up to $3,000 in opposition to their common revenue.  

“In case you are going through an unusually high-income yr or had super losses, this may be a superb technique,” mentioned Ashton Lawrence, a CFP with Goldfinch Wealth Administration in Greenville, South Carolina.

In case you are going through an unusually high-income yr or had super losses, this may be a superb technique.

Ashton Lawrence

Monetary advisor at Goldfinch Wealth Administration

Nevertheless, these hoping to dump and repurchase the identical property want to concentrate on the so-called wash-sale rules, which stop somebody from deducting a loss in the event that they repurchase “considerably an identical” investments inside 30 days.

And buyers under sure taxable revenue thresholds could keep away from capital positive factors levies on worthwhile property held for multiple yr.

Then, they might repurchase the identical funding for a so-called stepped-up foundation, adjusting the acquisition worth to the present worth for decrease future taxes.

Donate to charity

Retirees age 70½ and older may consider a so-called qualified charitable distribution, a direct payment from pretax individual retirement accounts, which doesn’t count as taxable income.

Someone age 72 and older may use it to satisfy their annual required minimum distribution.  

“The qualified charitable distribution is a valuable gifting strategy if you want to give to charity in a tax-efficient manner,” Lawrence said.

Pay for medical expenses

If you plan to itemize deductions and spent significant amounts on medical expenses in 2021, it may make sense to pay off health-care bills before year-end to claim a larger write-off.  

In 2021, filers may claim the medical expense deduction if eligible prices — reminiscent of physician’s charges, hospital visits, prescribed drugs and extra — exceed 7.5% of adjusted gross revenue.  

“Qualifying bills charged to a bank card on or earlier than Dec. 31, 2021, will likely be reported in your 2021 tax return,” Harris mentioned.

Defer revenue into 2022

These anticipating to make much less in 2022 could contemplate deferring revenue, reminiscent of year-end bonuses or different funds into January.

“Beware, as your taxes might be larger in 2022 than 2021,” mentioned Patrick Amey, a CFP and advisor at Monetary Advisory Service, Inc. in Overland Park, Kansas. “However it might delay fee of taxes on revenue for a complete yr.”

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