Year-end investment planning tips

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Here are actions you can take by the end of the year with the potential to reduce your tax bill and to keep your portfolio on track.

Taking some of the following actions before this year ends may help reduce the amount you pay the IRS. These actions may also improve your overall financial picture.

Actions to consider now:

  • Review your portfolio with your advisors to help ensure your asset allocation aligns with your goals.
  • Ask your advisor for a realized and unrealized capital gain/loss report.
  • For tax planning purposes, determine whether the 0%, 15%, or 20% capital gains rate will apply to you and whether to consider adjusting the timing of capital gains recognition.
  • Meet with your tax advisor to prepare preliminary tax projections and evaluate whether to defer or accelerate income or expenses.
  • Determine if you need to make any adjustments to your tax withholding or estimated payments.
  • Review beneficiary designations and make any necessary adjustments.
  • Consider funding a flexible spending account (FSA) or health savings account (HSA), if applicable, during your employer’s annual benefits enrollment period if you don’t have one.
  • Create or add funds to your education savings program.
  • Meet with your advisors to review your cash flow and anticipated growth in net worth to determine if your wealth transfer plan will continue to meet your needs.
  • Review your insurance coverage to make sure it is adequate for your needs.
  • Review tax-loss selling strategies like tax-loss harvesting with your financial advisor. Remember, the last day to “double up” a position to help avoid a wash sale is November 29, 2022.

Actions to consider before December 31:

  • Make maximum contributions to your employer retirement accounts; if contributing to your IRA for 2022, the deadline is April 18, 2023.
  • Complete any Roth IRA conversions.
  • If you’re retired or have an inherited IRA, make sure you’ve taken your qualified distributions from accounts that require or allow that.
  • Make gifts to individuals or charities. The annual gift tax exclusion amount for 2022 gifts to individuals is $16,000 — but if you’re also funding a 529 plan, keep in mind that those contributions are included in the gift tax exclusion.
  • Sell securities by December 30, the last trading day in 2022, to realize a capital gain or loss in most situations. Remember the trade date — not the settlement date — determines the year of the sale and recognition of any gain or loss in most situations. Trades executed on or before December 30, 2022,* will be taxable events in 2022.

Although December 31 is the technical date many of these activities need to be completed for tax purposes, they will need to be put in process well in advance of December 31 to implement by year-end.

*December 31 falls on a Saturday this year, so you may want to consider a personal deadline of December 30, the last day of the year that markets will be open.

Wells Fargo Advisors does not provide tax or legal advice. This communication cannot be relied upon to avoid tax penalties. Please consult your tax and legal advisors to determine how this information may apply to your own situation. Whether any planned tax result is realized by you depends on the specific facts of your own situation at the time your tax return is filed.