TDG’s 2021 Year-End Tax & Financial Planning Tips

At The Dowling Group, we take pride in our ability to coordinate income tax savings with investment growth, charitable and retirement planning, gift and estate planning. While we do not yet know the extent to which there will be any new tax laws applicable for 2021 and 2022, here are our year-end tax and financial planning tips for 2021, which should apply to most taxpayers as the law currently stands.

Keep in mind that tax and financial planning advice will naturally vary according to each household’s goals, so we always advise our clients to contact us at 203‑967‑2231 to ensure that these and other strategies will work best for you.

Year-End Tax Return Tips

Federal Economic Impact and Child Tax Credits

  • Be sure to record the amounts of any economic impact and child tax credit payments you received in 2021 from the Federal Government. As these were based on gross income, we can double-check if you received the correct amounts and apply for amounts you should have but did not receive on your 2021 tax return.

Charitable Tax Deductions

  • If you do not itemize deductions, you can still get a limited deduction for charitable contributions made by check or credit card. The amounts are $600 for joint filers and $300 for single taxpayers.
  • Donate appreciated securities held for more than one year to make year-end charitable contributions that escape capital gains taxes, instead of selling securities and making after-tax donations.
  • If you are over 70½, you can make a 2021 qualified charitable donation directly from your IRA up to $100,000. Donating your RMD, required at age 72 in 2021, can keep the RMD from increasing the income shown on your tax return. This can beneficially affect various return deductions and phaseouts.
  • For 2021, taxpayers can claim a charitable deduction up to 100% of Adjusted Gross Income.

State Taxes and Remote Work

  • States are not uniform in their remote-work tax rules. If your employer is based in one state and you are working remotely from another, ask your employer how your 2021 and 2022 salary or other earned income are being reported to the states both where your employer is located and from where you are working remotely. Changes in withheld or estimated taxes may be advisable.

529 Plan Contributions

  • Deductible state tax contributions to Connecticut CHET plans can be made by anyone, even non-account owners. In NY and other states, grandparents and other non-owners can make contributions to a 529 plan, but only account owners can take a tax deduction. We can help with questions.

Financial Accounts Outside of the US and Cryptocurrency

  • Please make sure to inform us if you have an interest in any foreign bank, brokerage, trust related or similar accounts, and if you engaged in any cryptocurrency transactions like Bitcoin. The financial penalties for incorrect answers on your tax return’s foreign account questions can be severe.

Year-End Financial Planning Tips

  • Take advantage of the annual estate tax gift exclusions ($15,000 per donee for individuals, $30,000 for married couples.) Use the unlimited gift exemption for direct payment of tuition and medical expenses.
  • Confirm that you have spent or have a plan to spend your Flexible Spending Account balances, so they are not lost, and be sure to set 2022 contribution amounts.
  • Ask us about the tax pros and cons of converting traditional IRAs to Roth IRAs, as well as withholding and estimated tax payment review.
  • Maximize contributions to retirement plans and medical savings accounts.
  • If you are 72 or over, take the Required Minimum Distributions from retirement plans before December 31st to avoid potential penalties.
  • Contact us to discuss how to make maximum use of historically low tax brackets while they last.
  • If you used the special 2020 three-year qualified retirement plan distribution, review whether you would like to re-deposit any amounts into your plan income tax and penalty free and recover prior year taxes on the distribution amount.

Tax Loss Harvesting

  • Consult with us to discuss the best use of capital losses to offset realized gains and rebalance your investment accounts.

Annual Investment, Insurance and Beneficiary Review

  • Review your investment portfolio and your target asset allocation to see if you are on track.
  • Evaluate your various insurance policies and confirm whether the amount of coverage and deductibles remain adequate to achieve your goals.
  • Review beneficiary designations and update as necessary.

Charitable Planning

  • Meet with us to consider how to maximize several family, retirement, and estate planning goals, while significantly reducing income and estate taxes using IRS-approved charitable planning techniques.

Contact Us for More Money-Saving Strategies

We’re all tired of hearing that “this has been a year unlike any other”, but it is the truth. Knowing your finances are better prepared for the “new normal” may be one strategy that helps set you and your family at ease. Contact us at 203‑967‑2231 to schedule an appointment before year’s end. We look forward to speaking with you and optimizing your financial plan!

Wishing you and your families well,
Sean M. Dowling, CFP, EA
President, The Dowling Group Wealth Management

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ADV & Investment Objectives: Please contact The Dowling Group if there are any changes in your financial situation or investment objectives, or if you wish to impose, add or modify any reasonable restrictions to the management of your account. Our current disclosure statement is set forth on Part II of Form ADV and is available for your review upon request.