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Here are six ways you can optimize your tax plan to ensure you're not leaving any money on the table.

Taxes shouldn't be something you only think about at the end of the year, or as you prepare your return in the spring. It's an ongoing, year-round process that requires thoughtful planning to identify and capitalize on opportunities for tax-efficiency.


Review your withholding


The IRS has released a new version of Form W-4 for 2020, incorporating changes made by the Tax Cuts and Jobs Act. The information provided on this form determines how much of your income is withheld from your paycheck.


If you choose to withhold more of your income, you'll receive less pay in every check, but may end up owing less come tax time. If you choose to withhold less of your income, your paychecks will be bigger, but your ultimate tax bill may be greater.


Generally, we advise that you don't over-withhold for the purposes of obtaining a refund — that way, you can put your money to work and take advantage of compounding growth instead of allowing the government to hold onto it. However, the amount you choose to withhold will depend on your personal circumstances and other income. Work with your tax advisor to review and, if necessary, update your W-4 to ensure that it's aligned with your preferences.


Maximize contributions to your tax-deferred accounts


Take every opportunity to maximize your contributions to tax-deferred accounts: your 401(k), your IRAs and health savings accounts (HSA).


In 2020, you can contribute up to $6,000 to a traditional or Roth IRA; $7,000 if you're age 50 or older.1 Depending on your income level and tax-filing status, traditional IRA contributions may be tax deductible. 401(k) contribution limits have increased to $19,500; individuals age 50 or older may contribute an additional $6,500, if they wish.


If you are enrolled in a high-deductible health plan (HDHP), you may contribute up to $3,550 (for individual health plans) or $7,100 (for family health plans) to an HSA in 2020. These contributions are tax-deductible, and distributions from HSAs are tax-free when used for qualified medical expenses. Given the continued rise of health care expenses, this can be a powerful savings tool for covering medical costs during retirement.


Consider converting your traditional IRA to a ROTH


If you have a traditional IRA and don't anticipate needing it to fund your retirement, you may want to consider converting it to a Roth IRA. By doing so, you would avoid the taxes associated with required minimum distributions. Furthermore, if you intend to pass your IRA on to your children, converting from a traditional to a Roth will save them from a potentially burdensome tax bill as well.


The SECURE Act of 2019 changed the rules for inherited retirement accounts. Depending on the beneficiary, the new rules can require IRA assets to be fully distributed by the end of the 10th year following the original account owner's death.2 Where before, a beneficiary could stretch IRA distributions and continue to enjoy tax-deferred growth over the course of their lives, they may now have to fully distribute and pay the associated taxes over a short, 10-year period.


It's important to note that Roth IRAs are also subject to SECURE Act's 10-year distribution rules. However, unlike a traditional IRA, qualifying distributions from a Roth IRA to the beneficiary over that period will be tax free. Converting to a Roth IRA requires that you pay the taxes on the account assets in the year the conversion takes place. Work with your CPA or estate planning advisor to determine whether a Roth conversion makes sense given your current and anticipated tax rates.


Gift appreciated assets to children or charity


Gifting appreciated securities or property to individuals in lower tax brackets (such as your children) can be very beneficial. As long as the person receiving the gift earns less than $40,000 in income ($80,000 if married filing jointly for 2020), they will incur no capital gains tax when selling the gifted assets.


For charitable donations, gifting appreciated securities that have been held longer than one year may be more beneficial than gifting cash. Doing so allows a donor to claim a deduction for the fair market value of the securities without having to pay capital gains taxes that would otherwise be incurred upon their sale.


Make a qualified charitable distribution from your IRA


If you are required to take a minimum distribution from a traditional IRA but don't have a need for the funds, consider a charitable gift using a Qualified Charitable Distribution (QCD), sometimes known as a “charitable IRA rollover."


A QCD allows an individual who is age 70½ or older to make a direct charitable gift of up to $100,000 from a traditional IRA and have it count toward annual minimum required distributions.3 The individual incurs no income tax for the IRA distribution, and there is also no corresponding tax deduction. Payments must go directly to a public charity, and cannot be made to the account owner, a donor advised fund or most private foundations.


However, following the passage of the SECURE Act, any contributions to a tax-deductible IRA after age 70½ reduces the amount allowed for the QCD. Therefore, those planning to make charitable contributions using a QCD will be better if they do not make tax-deductible IRA contributions once they reach age 70½.


Bunch your charitable gifts into a single year


Taxpayers who spread their charitable contributions over a number of years may not be able to take advantage of a tax deduction for these gifts if the gift falls below the standard deduction. In contrast, those who bunch their charitable contributions into a single year in order to exceed the standard deduction threshold may be able to fully deduct their contributions.


If you want to bunch charitable contributions for tax purposes but still prefer to make charitable gifts over time instead of all at once, consider using a donor advised fund (DAF). Those who contribute to a DAF can claim an immediate tax deduction when the gift is made and initiate distributions to qualified charities later, according to their wishes. Consult with your tax advisor to determine whether bunching contributions or contributing to a DAF is right for you.



1. Roth IRA contributions are subject to limits based on your modified adjusted gross income and tax-filing status. Consult your advisor to see if you are eligible to contribute.

2. Not applicable to the following eligible designated beneficiaries: a surviving spouse, a minor child of the account owner, a disabled or chronically ill beneficiary, or an individual who is fewer than 10 years younger than the account owner at the time of their death; each of whom may receive distributions according to different limitations.

3. Taxpayers eligible to make a QCD remains age 70 1/2 and older (did not change to age 72 - which is the new required beginning age for annual distributions applicable to those born after 6/1/1949 under the SECURE Act).

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