End of Year Reminders

As we approach the end of the year, this is the time to make sure you’re checking your list twice. Here are two key updates and actions we recommend you pay attention to.

1. Year-End Tax Planning and Tax-Loss Harvesting

We spend a considerable amount of time annually during the fourth quarter to look for tax saving opportunities for our clients, primarily using a strategy called tax-loss harvesting. This involves selling nonprofitable investments at a loss in order to offset or reduce capital gains taxes incurred through the sale of investments at a profit. If applicable, this could be the ticket to a lower tax bill.

2. 529 Education Planning and Withdrawals

For families utilizing 529 college savings plans, timing withdrawals are critical. A common oversight occurs when parents or students don’t take withdrawals in the same calendar year as the qualified education expenses they’re meant to cover. If withdrawals don’t match up with the expenses, the IRS could classify them as nonqualified, resulting in taxes and penalties.

What we recommend you do: Don’t forget to withdraw 529 funds in the same calendar year as the qualified expense. If you don’t withdraw funds in the same calendar year, the withdrawal may be considered nonqualified. Nonqualified withdrawals not only impact taxes but could also carry a 10% penalty, which erodes the savings advantage of the account.

If you have any questions on what to do as the end of the year approaches, please don’t hesitate to reach out. Let’s finish the year as best we can, so we can all have a strong start to next year.