Financial Planning | November 20, 2019

Tax Planning | November 20, 2019

9 Smart Year-End Financial Moves

by  Robert F. Bodio, Jr., GW & WADE PRINCIPAL

No matter where you're at in life, it is important to revisit your financial situation before the end of the year. In fact, there are some financial moves that need to occur by December 31 or you run the risk of losing savings and missing tax deductions. Also, there are a handful of legal considerations that we encourage you to ponder. Our goal is to help you end this year so that that your family or business is strongly positioned heading into 2020.

Here are 9 smart year-end financial moves to consider:

#1 – Spend Dependent Care Savings

Keep in mind that dependent care flexible spending account (FSA) balances do not roll over into the next year. Some employers allow a $500 carryover, but this option is unique to each employer and is not mandatory. Be sure to use your dependent care FSA balance before you lose it.

What’s more, if you’re in the midst of open enrollment for your employee benefits, you’ll generally get a bigger tax break on your federal income tax return if you contribute to a dependent care FSA versus the child care credit, particularly as your income rises.

#2 – Alternate Between Bunching Itemized Deductions and the Standard Deduction

As a result of state and local tax (SALT) deduction limitations on federal income taxes, many taxpayers are now taking the standard federal deduction ($12,000 individual, $24,000 joint). This offers a multi-year tax planning opportunity. Using this strategy, you “bunch” multiple years of charitable donations in one year so that when combined with your other deductions, you have itemized deductions in excess of the standard deduction. The following year, you could switch back to the standard deduction and then alternate based on the amount of combined itemized deductions.

A variation on the bunching strategy described above is to make a large donation to a donor-advised fund (DAF)[1]. By contributing to a DAF, you will still get the itemized deduction in the year of the donation to the DAF (subject to adjusted gross income [AGI] limitations), but once your DAF is funded, you can make your grants in whatever amounts to your favorite charities in a time frame of your own choosing (e.g., over multiple years).

Read more about our DAF tips on our blog, The Who, When, What and How of Charitable Giving. 

#3 – Offset Capital Gains

To help minimize your 2019 taxable income, consider tax loss harvesting by selling stocks, bonds and other funds that have lost value.

As an example, if your $50,000 investment in a large-cap equity mutual fund has lost $10,000, then you can sell that position before the end of the year. This will allow you to obtain a $10,000 capital loss to offset other capital gains. This could reduce your federal tax obligations by as much as $2,380. You can even keep your market exposure constant by immediately reinvesting the $40,000 in a different large-cap mutual fund or ETF. Just be careful of the IRS’s wash rule [2] as your new investment cannot be substantially identical to your original investment.

#4 Qualified Charitable Distributions from IRA’s

If you are an IRA owner and you are over 70 ½, rather than making your charitable gifts from a taxable account, consider making a qualified charitable distribution from your IRA. You may transfer up to $100,000 per year from your traditional IRA to a charity. Not only will it be treated as a tax-free distribution, but it will go towards satisfying all or part of your annual required minimum distribution.

#5 Estate and Gift Tax Consideration

For 2019, the annual gift exclusion is $15,000 per donee. Therefore, you can gift $15,000 to as many different people/family members as you wish. If you are married you can double the amount per year and gift $30,000.
With the lifetime exemption sunsetting in 2026 from the current $11.4 million per person to $6 million per person, you may want to consider a long-term estate tax planning strategy by making annual gifts.

#6 – Double Check W-4 Tax Withholdings

Many things can happen in the course of any one year, including marriage, divorce, adoption and more. If you’ve had any significant changes in your life these past several months, then be sure to double check your tax withholdings. Keep in mind that if you have too much tax taken out and end up with a tax rebate, that’s akin to giving the government an interest-free loan. Of course, you don’t want to withhold too little, and get an unwanted surprise (and potential penalties) come April 2020. Therefore, take a quick look at your tax withholdings now to make sure you’re accounting for any recent changes in your life.

#7 – Reconfirm Availability & Capability of Guardians & Executors (Personal Representatives)

Now is an important time to reflect on what has changed in your life and update related legal and financial documents accordingly.

To ensure that your documents are up to date, ask yourself these five key questions:

  1. Is the executor, now referred to as the personal representative, of your will still available and capable?
  2. Has your health changed, potentially escalating the need to update your living will with new end-of-life medical care requests or revisiting your business succession plan?
  3. Are your beneficiaries current? For example, is your ex-spouse still listed as a beneficiary, or has another relationship soured in some way?
  4. If you have children, are the guardians assigned to raise your children in the event of your death still emotionally and physically capable?
  5. Is the trustee assigned to manage the money for your children still capable?


Take advantage of the opportunities during the year-end holidays to speak with family members regarding your latest estate and legacy goals.

#8 – Add Needed Insurance Riders

Did you add a swimming pool or a trampoline to your property this year? Or, perhaps you’re running a small business out of your home. If so, you may want to consider purchasing an insurance rider to give yourself some extra protection in case of an injury or other mishap.

Keep in mind that any highly unique or expensive item in your home will generally not be covered by your homeowner’s insurance without a rider, such as fine art or jewelry.

Also, the end of the year is an excellent time to revisit your auto insurance policy. It never hurts to obtain a new quote from another insurance company or possibly drop coverage levels since your vehicle is another year older.

#9 – Make (or Defer) Large Purchases

If you’re a business owner, it may make sense for you to make a large purchase in 2019, increasing your business write-offs (and reducing your tax obligations) this year. However, the opposite can also be true.

If you are expecting your profit in 2020 to be substantially more than it was in 2019, then you may want to defer a large purchase until 2020. If you are in the 22% tax bracket this year, but will be in the 32% bracket next year, $10,000 worth of expenses incurred in 2020 as opposed to 2019 will save you an additional $1,000 of tax.

If you have questions about your financial situation, please contact us at any time. Perhaps you’ve recently experienced a major life event, or retirement is on the horizon? No matter what your circumstances, we welcome the opportunity to provide you sound financial advice, strategic tax planning and help you achieve your lifetime goals.

The information provided above is general in nature and is not intended to represent specific investment or professional advice. No client or prospective client should assume that the above information serves as the receipt of, or a substitute for, personalized individual advice from GW & Wade, LLC, which can only be provided through a formal advisory relationship.

Clients of the firm who have specific questions should contact their GW & Wade Counselor. All other inquiries, including a potential advisory relationship with GW & Wade, should be directed to:

Laurie W. Gerber, Client Development Manager
GW & Wade, LLC


[1] Donor-advised funds (DAF): a charitable giving vehicle administered by a public charity which manages charitable donations for organizations, families, or individuals; an alternative to direct giving or creating a private foundation. Provides administrative convenience and cost savings to donors, by conducting grantmaking through the fund.

Financial Planning Tax Planning

Robert F. Bodio, Jr.



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