Year-End Tax Planning

“Your life journey is about learning to become more of who you are and fulfilling the highest, truest expression of yourself as a human being. That’s why you’re here.”. – Oprah Winfrey


This is a significant part of our journey on this earth.  We explore.  We experiment.  We fail.  We win.  We serve others.  We contribute.


This is the sense of freedom I believe we all would like to obtain by leveraging our resources for what matters most to us.  This includes our time, networks, colleagues, and certainly our wealth.  However, much of the typical advice surrounding our finances takes wealth away from us and our ability to impact and contribute how we wish.


As we head into the end of the year, here are some strategies you can consider to gain more control of your wealth and contribute in ways that align to your values and priorities.


Key Takeaways

  • Paying more taxes now—while rates are still low and predictable—can save you substantial sums down the road.
  • Consider a Roth conversion if your income has been down this year due to job loss, reduced hours or Covid-related business setbacks.
  • Consider harvesting some stock market losses to offsets your gains this year.
  • Today’s low interest rates won’t last forever. Consider refinancing your mortgage and stepping up your charitable giving.

Hard to believe, but it will soon be time to file taxes again. Seems like we just filed yesterday due to all the Covid-induced delays and extensions. But that was for 2019. Now it’s time to focus on 2020. I know many of you would like to forget 2020, but this tumultuous year has provided us with some great tax-saving opportunities to consider before year end. Taxes are most likely to go up, not down, in the years ahead, but no one really knows by how much, when, and where.


The favorable tax brackets and tax rates that were ushered in as part of the 2017 Tax Cuts & Jobs Act (aka Trump Tax Cuts) are set to expire at the end of 2025. If no new legislation is passed, tax rates will go back up and brackets will come down. Those changes could come even faster if the Democrats take the Senate after the Georgia runoffs in January.


When it comes to taxes, the best thing to do is to control what you can control. Here are simple strategies to consider (as always, consult with your legal and tax advisors before moving ahead).


  1. Roth Conversion. Your income may be down this year due to layoffs, reduced hours or business setbacks. This may be a good opportunity to consider converting the qualified money in your IRA to a Roth IRA. This allows you to shield those assets from rising tax rates in the future. If you have “lazy” dollars sitting around and your AGI is expected to be below $171,000 (single filers) or $326,000 (filing jointly), it may be an opportune time to do the Roth conversion. This will keep you in the 24% tax bracket and you’ll never have to pay tax again on any future earnings in the Roth. Plus, this strategy will remove RMD requirements later in life (and when passing on those dollars to the next generation).


  1. Tax-Loss Harvesting: If you have money-losing positions in stocks or other assets, it could be a good time to take some chips off the table. You can use those losses to offset gains you might have accumulated in other positions on a dollar for dollar basis. If you don’t have enough gains to offset those losses, you can carry forward up to $3,000 in unused losses into future years and use them as needed. Just make sure you are not using short-term losses (i.e. less than 12 months) to offset long-term gains—and vice versa.


  1. Cash Out Mortgage Refinancing. If your primary home or other real estate assets have gone up a lot in value, you may want to consider refinancing at today’s low rates. Say you have $50,000 left on your mortgage, and you want to refinance to lower your monthly payment. Consider taking out a larger loan–say $80,000–because the monthly payment at today’s rock bottom rates might not be much higher than the payment on your $50,000 loan is today.


Also, the extra $30,000 is money you can put to work today since the “cost” of using it is so low. Instead of having that “lazy money” earn nothing in the equity of your home, you could invest the extra $30,000 in another rental property, or in the stock market or in a piece of land. The choice is yours and you won’t have to pay tax on any capital gains that result.


Just check with your other advisors to make sure this strategy makes sense for your broader strategies for the property, and that it can remain cash flow positive.


  1. Charitable donations are good opportunities to reduce your taxes and support the causes you care about. Thanks to the CARES Act, individuals and corporations that itemize their deductions for 2020 can elect to deduct donations amounting to 100% of their 2020 AGI (up from 60% of AGI in previous years).


  1. Conservation easement. This is a way for environmentally conscious owners of land parcels to obtain a hefty tax deduction in exchange for promising the government not to develop your land. The deduction can be worth many times the cost of your original investment in the property and the deduction can be applied to half of your AGI in the current year. We have several clients using conservation easements smartly for land they own in their primary home or vacation property, as well as in real-estate partnerships.


  1. Investments in oil, gas and real estate partnerships tend to generate paper losses in the early years. But those losses are usually tax deductible, thanks to government incentives designed to encourage people to invest in these often-risky partnerships. Just make sure you do your due diligence on a deal and consult with your legal and tax advisors before signing on the dotted line.




The year 2020 has been far from normal. If you or someone close to you has had unusually low (or high income) in 2020 please contact me to discuss tax saving strategies like those described above for the current tax year and beyond. In my next post, I’ll discuss the rationale for spending money now, to ensure you are immune for taxes in the future.