End of Year Tax Planning & Beyond

End of Year Tax Planning & Beyond


Many people may dread the thought of tax planning because it’s often complicated and cumbersome. Tax planning is more than just filling your returns. It involves seeking and adopting techniques that can help reduce the tax owed. So, it makes sense to start to do tax planning earlier in the year rather than later.


Additionally, tax planning involves more than just thinking about the current year. We encourage our clients to consider the next year and beyond.  Basic recommendations are typically to record income in a year when you pay less tax, to take income in a year when income is down, and to accelerate deductions to years when they can offset higher income. Below are some of our favorite strategies for consideration.



Tax Loss Harvesting

The financial markets tumbled in 2022. Many positions may now have an unrealized loss. Take those losses and use them to offset capital gains. Even if no capital gains are available, capital losses are deductible up to $3,000 and losses can be carried forward to offset gains in future years.



Maximizing Retirement contributions

Traditional retirement plans such as 401(k)’s, 403(b)’s, IRAs, and other qualified plans allow for contributions that escape income tax. The moment a contribution is made to the plan there is a tax savings of your tax rate multiplied by the contribution amount. A $6,000 contribution at a tax rate of 25% means the contribution only costs $4,500 – that is a great return! Retirement plan contributions can be made before year-end and IRA contributions can be made for the previous year, until April 18, 2023, for 2022.



Roth Conversions

Moving IRA balances to Roth IRA accounts allow for tax-free growth. Tax must be paid in the year of conversion for any funds converted.  We believe that tax rates will be higher in the future due, in part, to demographics. If future tax rates are higher, a Roth IRA conversion can be a good idea. With the depressed prices of investments, more shares or units can be converted from IRA accounts now at the same dollar amount .



Gifts of appreciated Property or Stock

Consider making charitable gifts of appreciated stock or property. Rather than making a cash contribution at year-end, give appreciated stocks or property. The donor receives a deduction for the fair value of the donation and avoids tax on the gain.



And, remember – any planning is better than no planning!



We are happy to discuss any of these or other strategies with you. AP Wealth offers Tax and Estate Planning and collaborates with our client’s accountant, attorney, and other financial advisors to provide a clear and comprehensive financial picture. We use The Lifetime Financial Solution™ as a tool for tax & estate planning. We analyze and look at the tax and estate implications of different scenarios related to federal estate tax, trust, and partnerships, gifting and gift tax, and wills and beneficiaries. If you’re interested in speaking with us about our tax and estate planning services, please call our office at (706) 364-4281.


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