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Is Tax Loss Harvesting Worth It?

Introduction After a rough year in the market, it’s rare an investor didn’t experience losses. How you treat those losses come tax time can mean a lot in the long run of your financial plan. “Good portfolio management focuses on after tax rate of returns,” says Ballast Advisors Managing partner Paul Parnell. Tax harvesting is … Read more

Checklists for Year-End Tax Planning

What are appropriate checklists for year-end tax planning? Tax planners often develop checklists to guide taxpayers toward year-end strategies that might help reduce taxes. Typically, suggestions are grouped into several different categories, such as “Filing Status” or “Employee Matters,” for ease of reading. When year-end approaches, it might be wise to review each suggestion under … Read more

How to Minimize Taxes During Market Downturns

 Market downturns, like the one through the first half of 2022, could be a good time to adjust your fund portfolio to minimize the tax bite. Here’s how to calculate the best ways to do that – now and in the future.  Taxable accounts you hold longer than a year incur long-term capital gains taxes … Read more

Watch Out for These Common Tax Scams

According to the Internal Revenue Service (IRS), tax scams tend to increase during tax season and/or times of crisis.1 Now that tax season is in full swing, the IRS is reminding taxpayers to use caution and avoid becoming the victim of a fraudulent tax scheme. Here are some of the most common tax scams to watch … Read more

There’s Still Time to Contribute to an IRA for 2021

Making a last-minute contribution to an IRA may help you reduce your 2021 tax bill. If you qualify, your traditional IRA contribution may be tax deductible. And if you had low to moderate income and meet eligibility requirements, you may also be able to claim the Saver’s Credit for 2021 based on your contributions to … Read more

2022 Key Numbers

A popular tool, the 2022 Key Numbers document is a comprehensive list of tax bracket and deductions information to assist you as you consider your financial plan for the year. It contains the relevant numbers for:

Individual Income Tax Planning: Alternative Minimum Tax (AMT), Charitable deductions, Child tax credit, Classroom expenses of elementary and secondary school teachers, Earned income tax credit (EITC), Expatriation, Foreign earned income, Itemized deductions, Kiddie tax, Medicare tax (additional payroll tax and unearned income contribution tax), Nanny tax, Personal exemption amount, “Saver’s Credit,” Standard deductions, Standard mileage rates, 2022 Federal Income Tax Rate Schedules (Individuals, Trusts, and Estates), 2021 Federal Income Tax Rate Schedules (Individuals, Trusts, and Estates), Adoption Assistance Programs

Business Planning: Earnings subject to FICA taxes (taxable wage base), Health insurance deduction for self-employed, Qualified transportation fringe benefits, Section 179 expensing, Small business tax credit for providing health-care coverage, Standard mileage rate (per mile), Special additional first-year depreciation allowance

Education Planning: American Opportunity and Lifetime Learning Credits, Coverdell education savings accounts, Deduction for qualified higher education expenses, Deduction for student loan interest, Gift tax exclusion, Kiddie tax, U.S. savings bonds interest exclusion for college expenses;

Protection Planning: Eligible long-term care premium deduction limits, Per diem limit, Archer Medical Savings Accounts, Flexible spending account (FSA) for health care, Health Savings Accounts (HSAs)

Estate Planning: 2021 and 2022 gift and estate tax rate schedule

Government Benefits:Social Security, Medicare, Medicaid

Retirement Planning: Employee/individual contribution limits, Employer contribution/benefit limits, Compensation limits/thresholds

Investment Planning: Maximum tax on long-term capital gains and qualified dividends, Unearned income Medicare contribution tax (“net investment income tax”)

 

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Ballast Advisors is a fee-based financial planning firm.  Our financial advisors serving the Twin Cities and Southwestern Florida can help you reach your retirement and financial goals.  Our offices are located in Woodbury, MN, Arden Hills, MN and Punta Gorda, FL.

IMPORTANT DISCLOSURES The opinions expressed herein are those of Ballast Advisors, LLC and are subject to change without notice. The third-party material presented is derived from sources Ballast Advisors consider to be reliable, but the accuracy and completeness cannot be guaranteed. Past performance is not indicative of future results. Nothing contained herein is an offer to purchase or sell any product. This material is for informational purposes only and should not be considered investment advice. Ballast Advisors reserve the right to modify its current investment strategies and techniques based on changing market dynamics or client needs. Broadridge Investor Communication Solutions, Inc. does not provide investment, tax, legal, or retirement advice or recommendations. The information presented here is not specific to any individual’s personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable — we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice. Ballast Advisors, LLC is a registered investment advisor under the Investment Advisers Act of 1940, as amended. Registration does not imply a certain level of skill or training. More information about the firm, including its services, strategies, and fees can be found in our ADV Part 2, which is available without charge upon request

2021 Year-End Tax Tips

Here are some things to consider as you weigh potential tax moves between now and the end of the year.

1. Defer income to next year

Consider opportunities to defer income to 2022, particularly if you think you may be in a lower tax bracket then. For example, you may be able to defer a year-end bonus or delay the collection of business debts, rents, and payments for services. Doing so may enable you to postpone payment of tax on the income until next year.

2. Accelerate deductions

You might also look for opportunities to accelerate deductions into the current tax year. If you itemize deductions, making payments for deductible expenses such as medical expenses, qualifying interest, and state taxes before the end of the year (instead of paying them in early 2022) could make a difference on your 2021 return.

3. Make deductible charitable contributions

If you itemize deductions on your federal income tax return, you can generally deduct charitable contributions, but the deduction is limited to 60%, 30%, or 20% of your adjusted gross income (AGI), depending on the type of property you give and the type of organization to which you contribute. (Excess amounts can be carried over for up to five years.)

For 2021 charitable gifts, the normal rules have been enhanced: The limit is increased to 100% of AGI for direct cash gifts to public charities. And even if you don’t itemize deductions, you can receive a $300 charitable deduction ($600 for joint returns) for direct cash gifts to public charities (in addition to the standard deduction).

4. Bump up withholding to cover a tax shortfall

If it looks as though you will owe federal income tax for the year, consider increasing your withholding on Form W-4 for the remainder of the year to cover the shortfall. There may not be much time for employees to request a Form W-4 change and for their employers to implement it in time for 2021. The biggest advantage in doing so is that withholding is considered as having been paid evenly throughout the year instead of when the dollars are actually taken from your paycheck. This strategy can be used to make up for low or missing quarterly estimated tax payments.

5. Maximize retirement savings

Deductible contributions to a traditional IRA and pre-tax contributions to an employer-sponsored retirement plan such as a 401(k) can reduce your 2021 taxable income. If you haven’t already contributed up to the maximum amount allowed, consider doing so. For 2021, you can contribute up to $19,500 to a 401(k) plan($26,000 if you’re age 50 or older) and up to $6,000 to traditional and Roth IRAs combined ($7,000 if you’re age 50 or older).* The window to make 2021 contributions to an employer plan generally closes at the end of the year, while you have until April 15, 2022, to make 2021 IRA contributions.

*Roth contributions are not deductible, but Roth qualified distributions are not taxable.

6. Take required minimum distributions

While required minimum distributions (RMDs) were waived for 2020, they are back for 2021. If you are age 72 or older, you’re generally required to take RMDs from traditional IRAs and employer-sponsored retirement plans (special rules apply if you’re still working and participating in your employer’s retirement plan). You have to make the withdrawals by the date required — the end of the year for most individuals. The penalty for failing to do so is substantial: 50% of the amount that wasn’t distributed on time.

7. Weigh year-end investment moves

You shouldn’t let tax considerations drive your investment decisions. However, it’s worth considering the tax implications of any year-end investment moves that you make. For example, if you have realized net capital gains from selling securities at a profit, you might avoid being taxed on some or all of those gains by selling losing positions. Any losses over and above the amount of your gains can be used to offset up to $3,000 of ordinary income ($1,500 if your filing status is married filing separately) or carried forward to reduce your taxes in future years.

Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2021

IMPORTANT DISCLOSURES

The opinions expressed herein are those of Ballast Advisors, LLC and are subject to change without notice. The third-party material presented is derived from sources Ballast Advisors consider to be reliable, but the accuracy and completeness cannot be guaranteed. Past performance is not indicative of future results. Nothing contained herein is an offer to purchase or sell any product. This material is for informational purposes only and should not be considered investment advice. Ballast Advisors reserve the right to modify its current investment strategies and techniques based on changing market dynamics or client needs.

Broadridge Investor Communication Solutions, Inc. does not provide investment, tax, legal, or retirement advice or recommendations. The information presented here is not specific to any individual’s personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable — we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

Ballast Advisors, LLC is a registered investment advisor under the Investment Advisers Act of 1940, as amended. Registration does not imply a certain level of skill or training. More information about the firm, including its services, strategies, and fees can be found in our ADV Part 2, which is available without charge upon request.

5 Reasons to Consult a Financial Planner on New Tax Legislation

            5 Reasons to Consult a Financial Planner on New Tax Legislation The new tax legislation proposed will undoubtedly impact the tax responsibilities of those individuals and families who have multi-generational wealth.  While the highest impact will be seen generally for our ultra-high-net-worth and highest-earning clients, at Ballast Advisors we … Read more

What to Do If (When) Your Taxes Start Going Up

        One variable that is hard to plan for in retirement is taxes. There are steps you can take despite the uncertain tax landscape. Not knowing what Congress will do should not stop you from planning. What to Do If (When) Your Taxes Start Going Up Not knowing what Congress will do … Read more

Inflation is Not a Hidden Tax – It’s a Very Real Tax 

                  Do you understand how inflation will impact your overall financial plan? Consider how the concept of bracket creep can impact your tax burden and purchasing power. Inflation is Not a Hidden Tax – It’s a Very Real Tax Bracket Creep accounts for a real tax increase … Read more