2020 Year End Tax Planning

As 2020 comes to an end (finally!), we encourage our individual and business clients to review their financial situations to identify tax planning opportunities. Here are a few tips to get you started.

Individuals

• Review your retirement contributions
  Have you maxed out your yearly contribution?
• Charitable contributions
  The CARES Act now provides a $300 “above-the-line” contribution for cash donations regardless of your income and whether you take the standard deduction or itemize your deductions.
• Consider a Roth IRA Conversion
  Is your income down significantly this year? Maybe consider a Roth Conversion.
• Harvest capital losses
  Consider selling losing investments to offset capital gains you have incurred.

Business Owners

• Evaluate the timing of your payroll tax deduction
  The CARES Act allowed employers to defer payment of employer Social Security taxes through the end of 2020. If you are a cash basis taxpayer, consider paying these amounts before the end of the year to take advantage of the tax deduction.
• Defer income
  Consider delaying billing if you are a cash basis taxpayer.
• Accelerate equipment purchases
  If you plan on investing in equipment in 2021, consider accelerating the purchase so you can take advantage of accelerated depreciation deductions in 2020.
• Consider carryback losses
  Net Operating Losses (NOLs) incurred during 2020 can be carried back up to five years for refunds of prior year taxes.
• Understand the PPP and how it may impact your tax situation