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Holiday Year-end Tax Tips for Investors



Tis the season for Happy Holidays and year-end tax tips so you can enjoy your Christmas presents! There are many tax changes (and opportunities) headed our way. The Supreme Court is deciding on major changes to the tax code that could limit the “unlimited power” of Congress’s ability to tax, including striking down how foreign gains could be taxed - a gift to the wealthiest^1 and people who earn income abroad. The estate tax exclusion is set to sunset in 2025 from about $11m per person to $5m. If you own a home in California for example, you may be a potential target for a Federal estate tax. Changes in the tax code are the only thing that doesn’t change. And, as Benjamin Franklin famously said, “In this world, nothing is certain except death and taxes." 


Here are some tax tips for year-end:


Maximize retirement plan contributions. This reduces your tax obligation in the current year and puts more away for retirement.

  • A Traditional 401(k), which is normally provided by your employer, offers a way for you to defer part of your salary and invest on a tax-advantaged basis: A few weeks left in the year, so ensure you’ve fully funded your 401(k) plan at $22,500 plus the $7,500 “catch-up” for people 50+. Next year, the deferral increases to $23,000 + $7,500.

  • If you’re self-employed, a self-sponsored retirement plan can give you more control over how you save for retirement. The SEP IRA maximum is $66,000 along with the Solo 401(k), except with the Solo K, you can make an additional $7,500 “catch-up” if you’re 50+. The max for both types of plans increase in 2024 to $69,000 and the catch-up remains the same. Deadlines for these plans are generally by tax filing. 

  • Traditional or Roth IRA contributions. If eligible, you can fund your retirement account up to $6,500 plus a $1,000 “catch-up” for people 50+. If you think tax rates are going up in the future, the Roth IRA may help reduce your future tax bills and although you don’t get the deduction up front, the Roth will grow and distribute tax-free in retirement. If your income is too high to make a direct Roth contribution, it may be possible to make a Backdoor Roth IRA contribution, which is largely suitable for people who currently don’t also have a Traditional IRA or SEP IRA.


Harvest investment losses: 

  • If you have portfolio unrealized losses, consider replacing those investments with other securities. Doing both the sale and buy on the same day would allow you to take the tax loss on the losing investment while also keeping you invested. If you’re an investor at Betterment, we can turn on automatic tax-loss harvesting, which takes all the emotions out of selling a losing asset and optimizing for great future results. (For more information, click here.)


Charitable and family gifting:

  • If you have appreciated investments, you can transfer them to a charity, or more efficiently, to a Donar-Advised Fund (DAF), commonly available at Fidelity and Schwab. Once they receive the investment it’s quickly sold which alleviates you from realizing the capital gain and you may also get the associated charitable deduction at the time of transfer.

  • The gift-tax exclusion is $17,000 this year per spouse, which means you can give cash or even better, an appreciated investment to a friend or family member for up to this amount. Once they receive it, they can sell the investment at their low or tax-free capital gains rate, which may likely be the case if they’re not working or are a student.

  • If you’re over 70.5, you can make a Qualified Charitable Distribution (QCD) from your Traditional IRA for up to $100,000 to a charitable organization and this would remove the associated tax from a current or future RMD. 


Next year, marginal tax rates will change. If you’re married and earn between $210,050 and $383,900, you will be in the 24% tax bracket. If over $$383.9k, then the rate increases to 32%, 35% after $487.4k, and 37% after $731.2k. All efforts should be made to keep you under the next marginal tax bracket, as other tax benefits and credits get lost the higher up you get. Deferring income to retirement, setting up a defined benefit plan and other deferral strategies may suit you in the long run.



(Chart created by ChatGPT)


At Eureka Wealth Management, I work with my clients’ tax advisors to come up with the best planning strategy to keep taxes under control now and in the future. I also do retirement planning, investment, and estate strategies. Call for a free, initial consultation at (760) 537-0791 or book a meeting at eurekawealthmanagement.com.


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