The end of the year is approaching, making it a good time to pause and review your financial strategies and decide what to do, if anything, in the short and long term. Below we have listed several items and reminders for consideration. Please do keep in mind that some of the tasks below are time-sensitive and may take longer than normal to complete due to a spike in volume. For reference, Schwab released its Year-End Giving Guidelines which provides timelines and due dates for charitable donations and gifting.

Charitable Giving and Tax Planning

• Charitable Gifting – Aligning a client’s financial plan with their charitable gifting wishes is a great way to support issues they are passionate about while also reducing tax liabilities. You may want to give additional funds to charity before the end of the year to realize tax deductions in the spring.
• Qualified Charitable Donations from Retirement Accounts – For those that are 70 ½ and over, it may make sense to either cover a portion of the required minimum distribution (RMD), or, if they are not yet of RMD age, simply reduce their future tax liability by arranging QCDs from IRA accounts.
• Gifting Stock to a Charity – If an investor is aware of a highly-appreciated stock in their portfolio, they can gain a tax deduction by gifting that stock to a nonprofit and moving a future tax liability out of the account.
• Open and/or Contribute to a Donor Advised Fund – A client with appreciated stock or cash can open or move money into this type of account and receive a current year tax deduction without needing to designate a specific charitable organization until, potentially, several years later. These funds can also be invested for growth within the donor advised fund.
• Donation Bunching – This is a strategy in which an investor stacks two-or-more years’ worth of donations into a single year and then itemizes the deductions for the year in which the donations are made.

Retirement Planning

• Company Stock – Do you have company stock from your employer? Now would be a suitable time to review with your advisor and decide whether to exercise your stock options in order to save on taxes. Speak with your advisor and find out if you can avoid unnecessary liabilities.
• Take It to the Max – If you are able to do so, it would be advantageous to increase, or max out, your retirement savings for 2024, optimizing your savings and reducing your tax liability on investment earnings.
• Tax Harvesting – The end of the year is an optimal time to review your portfolio and, if you have experienced some losses, to consider selling other holdings that have depreciated in value to offset taxes.

 Education Savings

• Paying College Tuition – If a parent or grandparent or other benefactor is paying the educational institution directly, the amount will not be counted as a gift.
• “Superfunding” 529 Plans – There is the opportunity to increase the amount of funds being saved for educational purposes by way of “superfunding,” which allows contributors up to five times the annual gift tax exclusion in a single year without triggering additional reporting requirements. In short, this allows one to essentially prefund five years’ worth of gifts at one time.

Flexible Spending

• Spend or Save – If you have a flexible spending account for healthcare or dependent care services, you will want to check the provisions of the account as some of the funds could be “use it or lose it” dollars, meaning they will not roll over into the new year.

To discuss these topics and strategies with a client relationship manager, please email info@vcmi.net.