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Year-End Tax Strategies You Should Consider

With the year-end approaching, it’s always smart to consider tax planning opportunities. You may be surprised to learn there are more ways to save than you think.

No matter which tax bracket you fall in, you generally want to reduce your income or defer it to another year. We’ve outlined a few strategies for you to consider:



  1. Delay or defer income to another year if it is possible and prudent. Make sure you consult with your CPA to confirm this is a viable option in your situation.
  2. Distribute up to $100,000 directly from your IRA to a qualified charity. You must be at least age 70 ½ to do so, but this strategy avoids taxation of your income on the distribution. It is the most tax-efficient way to fund charitable assets from your IRA funds.
  • With the change in itemized deductions and the increase in standard deductions, this strategy becomes extremely important for most retirees. If you are over age 70 ½ and contribute to charities, consider this option for your required minimum distributions.


  1. Maximize charitable contributions. Consider gifting your long-term appreciated stock or mutual funds to a charity. You can avoid capital gains taxes on the stock and receive a deduction against your ordinary income based on the fair market value of the stock or mutual fund.  Note: Due to the change in itemized deductions and the standard deduction, it may make sense to bunch your charitable contributions into a single year to maximize your deduction. You can also use a Donor Advised Fund to make charitable contributions in a single year or in high-income years, and then distribute the funds from the Donor Advised Fund to your favorite charities over several years.
  2. Sell stocks or mutual funds that are in a loss position. You can offset the loss against other capital gains or capital gain dividends. Any loss in excess of capital gains is deductible against your ordinary income up to $3,000 per year. Finally, any loss more than the $3,000 can be carried forward and used against future capital gains.
  3. Maximize your retirement contributions. The maximum 401(k) deferrals are $19,000 ($25,000 if age 50 or older). For 2020, the deferrals increase to $19,500 ($25,500 if age 50 or older). If you own a business, consider all retirement plan options since some can provide greater contributions than others.
  4. Maximize Health Savings Account (HSA) contributions. The single contribution rate is $3,500 and the family contribution rate is $7,000. The amounts increase slightly in 2020, the single contribution rate is $3,550 and the family contribution is $7,100. Consider managing your HSA account as a long-term, tax-free investment alternative. I discuss more about this scenario here.
  5. If you are self-employed, set up and fund a retirement plan. There are several retirement plan options available to maximize your deductions based on your income and your business structure. In addition, some retirement plans need to be set up before the end of the year. Consult with your Soundmark Advisor if this is something you are considering.


The strategies below don’t necessarily result in taxable deductions, but they do provide tax-free or tax-deferred savings options:

  1. Maximize IRA contributions. Even if the contributions aren’t deductible, the growth is tax-deferred.
  2. Consider a “backdoor” Roth IRA. If your income is too high to fund a Roth IRA directly, you may be eligible to contribute via a backdoor Roth IRA by converting your traditional IRA assets to a Roth IRA. Note: This strategy may not work if you have a regular IRA and you should consult with your Soundmark advisor before trying to fund a backdoor Roth account.
  3. Fund a child’s Roth IRA. If you have a child who has earned money, you can help them fund a Roth IRA up to the amount of their earned income (or $6,000 per year), whichever is less. Since most children and teens are in low tax brackets, a Roth IRA is a great way for kids to save money on a tax-free basis and start them on the path to a smart long-term investment plan.

As always, we are here to help. Please contact us immediately if you would like to discuss year-end tax planning strategies.

This report is intended to be used for educational purposes only and does not constitute a solicitation to purchase any security or advisory services. Past performance is no guarantee of future results. An investment in any security involves significant risks and any investment may lose value. Refer to all risk disclosures related to each security product carefully before investing. Soundmark Wealth Management, LLC, its advisors and its affiliates do not provide tax or accounting services. This material has been prepared for informational purposes only and is not intended to provide, and should not be relied on for, tax or accounting advice. Please consult with your tax advisor prior to engaging in any transaction.

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