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It is hard to believe that we are quickly approaching the end of 2021. Many of us looked forward to this new year in hopes that it would be better than 2020, and many of us may still feel that way as we head into 2022.
Before we look ahead at the next year, it is important to think about potential changes in legislation and what can be done about it prior to the end of 2021 from an investment and tax perspective. With that in mind, we offer the following suggestions:
Analyze your capital gain situation. There has been much discussion on Capitol Hill in reference to raising the capital gains rate, which currently ranges from 0% – 20% on assets held for longer than 1 year. An increase to this rate can affect the net returns on many of your investments. As the year comes to a close, it is important to look into realizing gains that have sat in your portfolio for a long time, or perhaps even generate losses that can be used to offset gains in future years. These losses may be more valuable in the event of a change in legislation.
Consider gifting assets out of your estate. The current estate tax legislation offers a generous exemption of approximately $11 Million per taxpayer ($22 Million for married couples). There has been much discussion on reducing this exemption amount. If your total assets currently exceed or are near the current exemption amounts, you may want to consider gifting assets prior to a possible change in existing legislation.
Set up a call with your CPA or tax advisor to review your taxable income for 2021. Perhaps it will make sense to do some charitable contributions prior to year-end. If so, you should consider doing so with appreciated assets. This gives you the benefit of an income tax deduction along with transferring capital gains to a charitable organization that will not have any tax liability. Another approach may be to gift a portion of your IRA or other tax qualified plan. This has the benefit of reducing the size of the account which will reduce the amount of Required Minimum Distribution (RMD) that you will be obligated to take beginning at age 72.
It is important to note that tax and estate planning is a critical component to managing personal finances. It is important to have a financial advisor that works well with your tax and legal advisors to ensure your plan is properly in place.
If you need help with any of these items or other financial matters, please feel free to contact either of us. We each have over 20 years experience in wealth management and are in your neighborhood. Best wishes to everyone in the remainder of this year.
Sincerely,
Gus Vega, CFP® – gus@totalviewadvisors.com
Daniel A. Brea, CFP® – dbrea@totalviewadvisors.com
This article was written by Gus Vega and Daniel Brea, Financial Advisors at Total View Advisors. They can be reached at (786)315-4870, 9155 S. Dadeland Blvd., Suite 1014, Miami, FL 33156. Total View Advisors is not a registered broker dealer and is independent of Raymond James Financial Services, Inc. Securities offered through Raymond James Financial Services, Inc., member FINRA / SIPC. Investment advisory services offered through Raymond James Financial Services Advisors, Inc.
