Time to start year-end financial planning

With 2023 fast approaching, from a tax and financial planning perspective, this is a great time to assess your portfolio, income needs, and tax projections.

With the stock market down, November is an excellent time to look at those bank statements you’ve been reluctant to open. The good news is that you may be able to “turn lemons into lemonade” by claiming a portion of your losses for tax purposes to reduce your current or future tax bills. Suppose you have a $10,000 down investment and have $10,000 in capital gains this year. In this case, you can sell the losing position and offset the $10,000 gain to reduce your taxes in 2022. If you don’t have capital gains, you can still use up to $3,000 of reaped losses against your regular income and use the rest for tax offsets in subsequent years.

There are many ways to improve your tax situation. If you own a business, sit down with your accountant and financial advisor to discuss shifting or accelerating your income before the end of the year. For example, if you are a solo entrepreneur, you can set up a Solo 401(k) before December 31, 2022. If you miss that deadline, consider a SEP IRA as an option to lower your taxes for 2022 since you can set one up retrospectively before your tax return due date plus extensions. Individual taxpayers should review their IRA and 401(k) deferral amounts to optimize tax and retirement benefits. This year, the current IRA contribution is $6,000 for those under the age of 49. It’s $7,000 for people over 50 if you include the $1,000 catch-up contribution.

Consider concentrating or “bundling” your prints. If your individual deductions are close to the standard deduction, you may want to pool your deductions in a particular year to save on taxes. Let’s say you sold your business this year and want to make several charitable donations. You could “bundle” the more significant one-time donation and several years of regular annual donations to maximize your deductions that year. Just let your charity know you’ll be expediting your charitable gift this year, and don’t expect any donations for a few years.

Finally, take the time to review your state and federal income tax withholdings to ensure your tax withholding amounts match your tax liabilities. When you regularly get tax refunds in the mail, you’re giving away an opportunity to earn interest on your money. It’s never a good idea to give anyone an interest-free loan, let alone the government.

Eric Tashlein is a Certified Financial Planner Professional, Founder and Financial Advisor to Connecticut Capital Management Group, LLC, 2 Schooner Lane, Suites 1-12, in Milford. He can be reached at 203-877-1520 or at www.connecticutcapital.com. Connecticut Capital Management Group, LLC “CCMG” is a registered investment adviser. The information presented is for educational purposes only and is not intended to constitute an offer or solicitation for the sale or purchase of any specific security, investment or investment strategy. Investments involve risk and are not guaranteed unless otherwise stated. It is important that you first seek advice from a qualified financial advisor and/or tax professional before implementing any of the strategies outlined here. Past performance is not an indication of future performance. “CCMG” may discuss and display charts, graphs, formulas, and stock picks that are not intended to be used by itself to determine which securities to buy or sell, or when to buy or sell them. Such charts and graphs provide limited information and should not be relied upon on their own in making investment decisions. “CCMG” and Connecticut Benefits Group, LLC are not affiliated.

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