What can you still do before the year ends? David talks through four strategies that you’ll want to consider before the clock strikes midnight on December 31.
(Click the featured times below to jump forward in the episode)
Ready for 2021? Can you imagine if someone predicted what this year would be like? That the stock market would crash that goes back to all-time highs, you’d be in a global pandemic, the election, and social justice movements would all occur in the same year? One thing that we did love about 2020 though was that the Chiefs won the Super Bowl. But before the year ends, there might be a few financial moves you should make and tax strategies to consider.
A few weeks ago, we asked if taxes would go up under Biden as president. As a follow-up, what do we do about our financial lives when we don’t know yet if there will be a Democratic sweep? While Biden is the president-elect, we are still waiting to see what happens with the runoff Senate elections in Georgia. Right now, the polls are close. If both Republicans hold their seats what happens to your taxes? Or, if those seats flip, how would that differ?
Do you understand where you are from a gain and loss standpoint? David talks about tax loss selling as a part of your tax strategy for this year. Is tax loss selling the same as tax loss harvesting? Are there long-term capital gains in your portfolio that you want to harvest? Are you concerned that next year the Biden plan will raise the tax rates on long-term capital gains? What kind of taxes might you be facing then?
David is convinced that the tax rates for everybody is going to go up due to the trillions of dollars of debt our government has. Over your retirement, tax rates are likely going up and maybe even double. This is why a Roth conversion makes so much sense to do it right now. But you want to do it in steps to avoid a major jump in your tax bracket. If you’re already retired and on Medicare, make sure you watch for potential penalties.
Finally, are you planning on giving a gift but worried about the gift tax? Where can you freely give? David shares what gift options you have, be it to your kids, grandkids, or a friend. Other ways to gift money indirectly include paying school expenses and medical bills, which can be done at any amount. You can even contribute to a child or grandchild’s IRA.
Listen to the entire episode or click on the timestamps below to skip to a particular segment.
[0:23] – This is our final show of 2020. Ready for 2021!
[3:43] – Biden will be taking over the presidency, but we don’t know yet about the Democratic sweep.
[6:47] – Make sure you know where you stand from a gain/loss standpoint and consider tax loss selling.
[8:57] – Are there long-term capital gains in your portfolio that you want to harvest?
[13:09] – The Roth conversion deadline for 2020 is December 31.
[17:35] – What do you need to know about the gift tax?
“For 2020, you’ve still got a couple days left–if a Roth conversion makes sense, go ahead and get it done. Small is most times better than none at all.”
– David Dickens