Here are actions you can consider taking by the end of the year with the potential to reduce your tax bill and to keep your portfolio on track.
Consider taking some of the following actions, which may help reduce the amount you pay the IRS, before year-end. 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 help determine if your wealth transfer plan will continue to meet your needs.
- Review your insurance coverage to help 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 28, 2023.
Actions to consider before December 31:
- Make maximum contributions to your employer retirement accounts; if contributing to your IRA for 2023, the deadline is April 15, 2024.
- Complete any Roth IRA conversions.
- Remember to take your Required Minimum Distributions (RMDs) from retirement accounts this year, if applicable.
- Discuss with your tax advisor whether qualified charitable distributions (QCDs) from your IRA are appropriate for you if you are age 70½ or older.
- Make gifts to individuals or charities. The annual gift tax exclusion amount for 2023 gifts to individuals is $17,000 —keep in mind 529 plan1 contributions are included in the gift tax exclusion.
- Sell securities by December 29, the last trading day in 2023, 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 29, 2023,* will be taxable events in 2023.
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 Sunday in 2023, so you may want to consider a personal deadline of December 29, the last day of the year that markets will be open.
1 Please consider the investment objectives, risks, charges and expenses carefully before investing in a 529 savings plan. The official statement, which contains this and other information, can be obtained by calling your financial advisor. Read it carefully before you invest.
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.
