Year-end Tax Planning Considerations

2020 has been an unusual year to say the least. As we have adapted to “new normals” throughout our lives, following are some important changes to consider as the year closes for your tax strategy.

Required Minimum Distributions (RMDs): One normal year-end item you don’t have to worry about this year is taking a RMD from your IRA. Thanks to the CARES Act, the RMD requirement for 2020 was suspended.

Charitable Contributions:Even if you are not itemizing your deductions this year, the CARES Act created a charitable deduction of up to $300 for cash contributions to qualifying organizations. Contributions to Charities, Donor Advised Funds or Private Foundations need to be arranged with your advisor early in December to allow proper time for processing with custodians.

Tax-Free Family Gifts: The annual 2020 gifting limit is $15,000 per person with no gift tax, reporting requirements or tax consequences to the recipient. Talk to your Moneta Advisor before year-end to allow time to process.

Health Savings Account (HSA) Contributions: Maximum contribution amounts for 2020 are $3,550 for individuals and $7,100 for families (these limits will go up slightly for 2021). The annual “catch up” amount for people age 55 or older is $1,000. The actual deadline to contribute to an HSA for 2020 is April 15, 2021. At a minimum, you should consider contributing enough to cover your annual health plan deductible.

Leftover Flexible Spending Account (FSA) Funds: FSAs are generally “use-it-or-lose-it” plans. If you participate in your employer’s FSA, you will need to check with your particular employer’s plan to see if it has any of the following special provisions. A carryover provision may allow up to $550 of unused funds to be rolled into the next calendar year. A grace period may allow a period (which can be up to 75 days after year-end) for which you can submit 2021 expenses against your 2020 account dollars. A plan may allow either the grace period or a carryover, but it may not allow both. A run-out period is how long after year-end you can still get reimbursed for 2020 expenses (usually up to 90 days).

Retirement Plan Contributions: The maximum employee deferral limit for 401(k), 403(b), and several other employer plans for 2020 is $19,500 for employees under age 50 and $26,000 for employees aged 50 and older. Check with your employer for the deadline to make any end-of-year changes.

If you have any questions or concerns about your specific year-end considerations, Moneta, your Family CFO, is here to assist.


© 2020 Moneta Group Investment Advisors, LLC. All rights reserved. These materials were prepared for informational purposes only. You should consult with an appropriately credentialed professional before making any financial, investment, tax or legal decision. Past performance is not indicative of future returns. These materials do not take into consideration your personal circumstances, financial or otherwise.

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