Year-End Financial Planning Checklist

Below are some considerations to keep in mind as year-end approaches.

Income Tax Considerations

• Review income increase or decrease, income type, or income location.
• Itemized Form 1040 returns may weigh accelerating deductions into this tax year (e.g., medical expenses).
• If expecting a net operating loss from a business, review a potential Roth conversion.
• Maximize retirement, dependent care accounts, and health savings accounts to reduce taxable income.
  • Due to rollover/carryover restrictions, spend the FSAs and dependent care accounts spend in the current calendar year.
• Review tax withholdings on retirement account distributions and make desired changes for the new year.
• Anticipate quarterly estimated tax payments.
• For clients with foreign accounts, complete your Foreign Bank and Financial Accounts Report.

Investments

• Review investment accounts with all providers to ensure allocation reflects intended risk tolerance and no inadvertent concentrations.
• Ensure assets are located in most tax effective location (e.g., taxable bonds in tax-deferred accounts, equities in taxable accounts)
• Estimate tax bracket for 2023 (and 2024 if retirement/business sale is upcoming) to determine tax loss harvesting for TY 2023 or delay to early 2024.
• Consider a budget for capital gains for 2024. It may be effective to take gains early in the year and work them off throughout the year. If anticipating a sale of a business, consider an installment sale to spread out capital gains over several years.

Retirement

• Maximize retirement savings, including catchups, if you are 50 or older.
• Remember to take RMDs as required to avoid a potential 25% penalty on the RMD that should have been taken but was not.
• Review the SECURE 2.0 Act’s other provisions to see which might impact you. The SECURE 2.0 Act raised the age requirement for RMDs to age 73.
• If you reach age 72 in 2023, the required beginning date for your first RMD is April 1, 2025, for 2024.
• If you turned 72 in 2022 and are subject to the 72 RMD rule, you may be subject to two RMD distributions:
  • The first RMD was due by April 1, 2023, based on your December 31, 2021, account balance.
  • The second RMD is due by December 31, 2023, based on your December 31, 2022, account balance.
• Review Medicare and Affordable Care Act (ACA) enrollment options and adjust as necessary during enrollment periods.
  • The enrollment period for ACA is November 1 to December 15 (January 1 start date)
  • The enrollment period for Medicare is October 15 to December 7 (January 1 start date)

Charitable Contributions and Gifting

If charitably inclined

• Donate low-cost basis investments rather than cash gifts.
• Redirect Required Minimum Distributions (RMDs) directly to charity through qualified charitable distributions rather than realizing the income. At 70 ½, you are allowed to make qualified charitable distributions to eligible charitable organizations.
• Utilize donor-advised funds to time a charitable deduction this year while maintaining your ability to choose future charities.
• Gather 2023’s charitable gifts for tax documentation (self-reported to IRS).

Family gifts

• Consider making gifts to your children or family members.
• Consider gifts into a 529 plan.
  • If any withdrawals occur during the tax year, reload any tuition-related refunds to avoid penalties and taxes on nonqualified distributions.
  • Can frontload a five-year annual exclusion gift, if needed.
• Establish Roth IRAs as gifts for younger family members who may have earnings from work.

• Review estate plan to check if there are any opportunities around any unused lifetime exemption.
• Business Owners: If doing annual appraisals, consider using an independent appraiser to value the interest of assets to be gifted by year-end.

Estate Plan Review

• If you inherited an IRA in 2023 or 2022, it may be subject to the 10-year rule for distributions. Ensure your tax situation is planned accordingly for optimal time to realize income tax in future years.
• If there was a birth or death in your family, ensure IRA, TOD, and insurance beneficiary designations align.
• If promissory notes exist with your family, consider forgiveness as an option for “gifting” with lower interest rates..
• Plan time to review your estate plan to coordinate with your family situation and changing estate and tax laws.
  • Include an insurance coverage analysis to mitigate risk.
  • Include insurance review for potential income replacement.

For more information or advice on preparing your financial plan, reach out to a Calamos Wealth Management advisor.

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