Matt Roberts, MFM, CFP®, CAP®, Chief Planning Officer
November 10, 2021
With the end of the year fast approaching, now is the time to ensure your ducks are in a row to take advantage of charitable giving opportunities, tax-deferred growth investments, and other tax-related strategies.
For clients of Syverson Strege, we have likely discussed these strategies as part of the financial planning process. If you’re not a client of Syverson Strege, it’s important that you sit down with a financial planner and tax preparer to ensure you’re not missing out on any opportunities that, in many cases, won’t exist if you wait until January 1.
Items to Handle Before December 31
Gifts to charity must be made before the end of the year. This includes gifts of cash, securities, and personal property. In addition, Qualified Charitable Distributions (QCDs) will need to be made by the end of the year to provide benefit in 2021.
Please note that there are two remnants from the CARES Act that apply in 2021 that pertain to charitable giving. This includes an above-the-line-deduction of $300 per person that can benefit those who don’t itemize. In addition, the limit for cash gifts is 100% of Adjusted Gross Income (AGI). The limit in 2022 will revert to 60% of AGI.
This may sound odd, but there could be a case made to generate more income in 2021 if possible. This could include harvesting capital gains or doing a Roth conversion. Congress is working on tax reform that could increase the tax rate on ordinary income and capital gains in 2022. The income must be realized this year to apply 2021 rates.
If you have access to an employer-sponsored retirement plan such as a 401(k) or 403(b), you could consider maximizing the contributions you put into the plan. The maximum employee contribution for a 401(k) and 403(b) is $19,500. An additional contribution of $6,500 can be made for those 50 or older. Unlike IRA contributions, these contributions need to be made before year-end to qualify for 2021.
Items That Could be Handled Before April 15
Traditional and Roth IRA contributions can be made up until you file your taxes or April 15. The maximum contribution is $6,000 with an additional $1,000 catch-up contribution for those 50 or older.
Health Savings Account (HSA) contributions may also be made up until you file your taxes or April 15. The maximum contribution to an HSA for an individual is $3,600 or $7,200 for a family. There is a $1,000 catch-up if you are 55 or older.
As a parent or grandparent, you may have established a 529 Plan to help save for college. Each state has their own rules regarding the deductibility of contributions that can offset state income taxes. You can see your state rules by clicking here. In Iowa, you can deduct a contribution of $3,474 per beneficiary. For example, in the case of parents, each parent can take a $3,474 deduction for each child. The contribution can be made up until you file your state income tax return or April 30.
As a client of Syverson Strege, here are some specific deadlines for the 2021 tax year that may apply to your financial situation.
12/15/21: Final date to submit requests to fund charitable gifts with securities.
12/15/21: Make sure all checks for Qualified Charitable Distributions (QCDs) from IRAs have been mailed (the charity needs to cash the check to qualify as a QCD for 2021.)
12/18/21: Final date to submit request for Roth conversions.
12/29/21: Final date to request distributions for investment accounts to ensure the funds go out by December 31.
12/31/21: Checks to charity must be postmarked to qualify for a 2021 tax deduction.
12/31/21: Final date to make employee contributions to 401(k)s and 403(b)s.
12/31/21: The sale of stocks, bonds, ETFs, or mutual funds must be made for the capital gain or loss to count toward 2021 income.
04/15/22: Last day to contribute to Traditional or Roth IRAs for 2021.
If you need a financial planner for advice on year-end deadlines or your financial planning, call Syverson Strege at 515-225-6000 to schedule a complimentary, no-obligation, private consultation.