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
