As we near the end of the year there are going to be some opportunities to make sure you get your finances in order.  It’s important to check off your annual financial to-do list.  There are a few other money moves to be aware of as we come to a close on the year.

Big changes in 2021? Did you start a new job or leave a job behind? Did you retire? If notable changes occurred in your personal or professional life, then you may want to review your finances before this year ends and 2022 begins.

Even if you think your year didn’t include any big changes, the end of the year is still a good time to recalibrate.  

Keep in mind this article is for informational purposes only and is not a replacement for real-life advice. Please consult your tax, legal, and accounting professionals before modifying your tax strategy.

Do you engage in tax-loss harvesting? That’s the practice of taking capital losses (selling securities worth less than what you first paid for them) to manage capital gains. You might want to consider this move, but it should be made with the guidance of a financial professional you trust. 

In fact, you could even take it a step further. Consider that up to $3,000 of capital losses in excess of capital gains can be deducted from ordinary income, and any remaining capital losses above that amount can be carried forward to offset capital gains in upcoming years.  Again, it can’t be stressed enough that working with a tax professional is key when trying to employ tax strategies. 

Do you want to itemize deductions or take the standard? The standard deduction for the 2021 tax year is $12,550 for single filers and $25,100 for joint, according to IRS.gov. If you do think it might be better for you to itemize, now would be a good time to get the receipts and assorted paperwork together and reach out to a tax professional.  You could run through both scenarios and see which option would be more advantageous.

Thinking of gifting? Donating to a charity is one of the five concerns that most of our clients have.  Are you thinking about donating to a qualified charity or non-profit organization before 2021 ends? Your gift may qualify as a tax deduction. For some gifts, you may be required to itemize deductions using Schedule A.

Double-check beneficiaries. Take a look at your beneficiary designations.  If you haven’t reviewed them for some time, double-check to see that your assets are structured to go where you want them to go, should you pass away. Lastly, look at your will to see that it remains valid and up-to-date.  It is far too common that people forget to change beneficiaries after a divorce or the death of a loved one.

Check on the amount you have withheld. If you discover that you have withheld too little on your W-4 form so far, you may need to adjust your withholding before the year ends.

What can you do before ringing in the New Year? New Year’s Eve may put you in party mode, eager to say goodbye to the old year and welcome 2022. Before you put on your party hat, consider speaking with a financial or tax professional. Do it now, rather than in February or March. Little year-end moves might help you improve your short-term and long-term financial situation. You can schedule a 15-minute no-obligation discovery call with us at Redwood to see where you are in relation to your goals.

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