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3 Things to Discuss with your CPA or Financial Advisor by Year End

December 13, 2022
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The last quarter of the year always seems to fly by quickly between holidays, time off work and preparing for the New Year to begin. With the New Year comes new resolutions to be conquered and often families have at least one financial resolution.  Here are the top financial strategies you should consider before year’s end to help jumpstart 2023.

Review Your Potential for Capital Gains Distributions+

Although most investments are down for 2022, the preceding years of 2019-2021 saw record growth.  Many mutual fund companies experienced turnover and withdrawals and have been forced to sell investments at a gain from prior years.  Law requires gains from the sale of the underlying stocks be passed along to the shareholders.  These distributions are paid based on who owns the funds on the “record date” of ownership – typically in December. To limit capital gains distribution exposure, investors can exchange into other funds or look for more tax-efficient portfolios for their taxable investment accounts.  In some cases, this may be unavoidable, but can at least be planned for in advance.


Capture Tax Loss Harvesting Opportunities+

With current market conditions, some investors might be seeing investments at a loss in their taxable accounts. By selling or exchanging into another fund, investors can capture these losses to offset other capital gains they may have realized or received from pooled investment products in 2022. Additionally, net capital losses can be used to offset up to $3,000 of ordinary income each year with the remainder carrying forward to other tax years.


Implement Creative Charitable Giving Strategies

Ask your tax professional whether you normally take the Standard Deduction or Itemized Deduction to reduce your taxable income. Since the standard deduction increased significantly from the Tax Cuts and Jobs Act, most households are no longer itemizing their deductions.  This may mean you’re no longer receiving a tax benefit from your charitable giving, but there may be other strategies for you to consider!


If you regularly contribute to charities or other non-profit organizations, consider “front-loading” a Donor Advised Fund.  You can make larger contributions upfront to your DAF, and then gift them to individual charities over the year (or multiple years) as you choose. Check out our article on Donor Advised Funds for more information on this.


Or, if you are over 70 ½ years old and have an IRA, you can make qualified charitable distributions (QCDs). This allows the IRA owner to contribute to charities of their choice directly from their IRA without reporting those distributions as income. If you typically make monthly tithes or donations, perhaps setting up an annual qualified charitable distribution would be more tax efficient for you. Check out our article on Qualified Charitable Distributions here.


Please reach out to discuss how any of these strategies may apply to your unique situation.

 J. Brooke Cassady

Robert W. Baird & Co. Incorporated does not offer tax or legal advice.For any changes that you make, be conscious of any tax liabilities, trading fees or costs that you may incur and be sure to discuss potential wash sale implications with your tax advisor.RB2022-1104