From Alex Oliver, CFP, CRPS – Wealth Advisor – First National Corporation

With two months to go until 2021, First National Corporation wants to ensure you are doing everything within your financial plan to mitigate taxes. Here are a few quick reminders to consider as you close out the year:

  • Max out your 401(k) or 403(b) at $19,500 ($26,000 if you are over the age of 50). If you are not sure what that requires, ask for a recent paystub and work backwards to contribute the correct amount each pay period to max out the plan.
  • Open an individual 401(k) if you are self-employed. Deferrals are due by 12/31, while profit sharing contributions can be made prior to your tax filing deadline.
  • Max out your Health Savings Account (HSA) if you have a high deductible health insurance plan. Spend down your Flexible Spending Account (FSA).
  • Offset investment gains with losses. First National Corporation handles this within the taxable accounts we manage, but you will want to make your advisor aware of other gains or losses outside of their management that require consideration.
  • Perform Roth conversions by 12/31 if you are in a lower income tax bracket due to job loss or early retirement.
  • While Required Minimum Distributions (RMDs) are waived thanks to the CARES Act, consider qualified charitable distributions if you are over age 70 1/2. Donor advised funds may also still be used to bunch up charitable contributions for a tax deduction in 2020, especially if you have highly appreciated securities in a taxable account.

Lastly, depending upon the election results, we may be reaching out to some of our clients to consider accelerating gifting to family members before the end of the year if a rollback of the federal estate exemption appears imminent in 2021 (retroactive to Jan. 1 2021).