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Year-End Tax Planning Strategies For 2020

Written by Canty Financial - Published on December 1, 2020

As 2020 comes to an end here are some last minute tax planning strategies to be aware of...

Charitable Giving

The CARES Act allows for an additional $300 charitable deduction for 2020. This will be available to all filers, regardless if you itemize your deductions or not.

Those who have not done so should consider donating at least $300 worth of donations to take advantage of this deduction.

Stimulus Checks Not Subject to Tax

Stimulus checks will not be subject to income taxes, it is considered a refundable tax credit. Learn more about the recovery rebate and calculation used for your stimulus check based on either your 2018, 2019, or 2020 tax returns.

Top Off Your Retirement Accounts

If you are financially able, consider contributing the maximum to retirement accounts such as your IRA or 401(K). 

Not only will you be saving toward your future, it will also reduce your taxable income for 2020.

2020 Retirement plan contribution limits:

  • Up to $19,500 to a 401(k), 403(b), and most 457 plans. There is also a $6,500 catch up contribution if you are 50 or older. You have until December 31, 2020, to contribute.
  • Up to $6,000 for an IRA, plus the $1,000 catchup contribution if you are 50 or older. With an IRA you have slightly longer to max out your contributions, until April 15th, 2021. 

Reminder 2020 RMDs are Waived

In accordance with the CARES Act (2020) all Required Minimum Distributions (RMD) are waived for tax year 2020. This applies to traditional IRAs, 401(K), and beneficiary IRAs. 

Roth Conversions

Those who are in the right position to do so may want to consider converting their traditional IRA to a Roth IRA. This strategy will allow you to pay a tax bill upfront, but have your investments grow tax free into retirement. 

Roth conversions involve both investment projections and tax planning to see if it fits your unique strategy. 

Unemployment is Taxable

Remember that all unemployment benefits are treated as taxable income and need to reported when you file your tax return. 

Financial Planning Questions

Feel free to reach out to a CFM advisor if you have any year-end financial planning questions.

Bill Canty, CFP®, CPA

Maureen Walsh, EA, Investment Advisor Rep.

Tina Alteri, CPA, Tax Advisor

Ed Canty, CFP®

Joe Canty, Investment Advisor Rep.

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