As we near the end of 2023, there are a few year-end items that are important to review:
1) Long-term Capital Loss
If a retail account has long-term capital loss to harvest, that may be helpful for your 2023 tax return. You are able to offset any long-term capital gains by the amount of long-term capital loss you harvested. If you have more loss after offsetting the gains, then you can apply up to a -$3,000 loss on the Schedule D. If there is still long-term loss remaining, you can move it forward to the 2024 tax year.
2) Short-term Loss
Short-term loss will not be reflected on the Schedule D; it is taxed as ordinary income, and your advisor can discuss your options in further detail if you have both short- and long-term loss. If you have large unrealized capital gains in a retail account and want to give to charity before the end of the year, you may want to consider gifting appreciated assets. If you are over age 70.5, another option to consider is taking a QCD (Qualified Charitable Distribution) from your IRA.
3) QCD Considerations
The maximum QCD amount for 2023 is $100,000. If you are taking RMDs, a QCD will reduce the amount of RMD that shows up for tax purposes. Please keep in mind a QCD will only reduce a RMD by the amount remaining at the time of the gift. For example, if your RMD was $10,000 for the year but you have already taken $8,000 out of the IRA, a QCD will only reduce your taxable RMD amount by up to $2,000.
4) Retirement Accounts
Every tax situation is different, so contact your advisor to see if any of these strategies may be helpful to you. If you are still in your working years, make sure you check the retirement accounts you have through your employer. If you are under 50, you can contribute $22,500 to your 401k, 403b, 457, etc.; and if you are over 50, that figure increases to $30,000. If you have not maximized your plan and cash flow will allow you to increase your contributions, please reach out to your advisor to discuss year-end funding. If you are contributing to a Traditional IRA or Roth, you have until tax time next year, but the 401k contributions must be in by December 31, 2023.
I hope you all have a happy and healthy holiday season. As always, please reach out to us if you have any questions or would like to discuss year end funding that helps your specific situation.