By Tim Courtney, Chief Investment Officer
The final weeks of the year can be hectic – especially during a pandemic, but it’s important that financial planning items requiring attention are squared away. Tying up loose ends now will give you peace of mind heading into the holidays and ensure a smooth tax filing season next year.
Though there are multiple year-end items we automatically address on your behalf, there are also a few that may be worth discussing further with your advisor as we quickly approach 2021.
1. Tax-loss harvesting: If appropriate, we sell meaningfully depreciated assets in client portfolios for losses to help off-set capital gains.1 While we already took this measure following the March market sell-off, there may be some further opportunity to book losses in certain areas.
2. Portfolio rebalancing: 2020 has produced an unusually large discrepancy among investment outcomes. Some companies and asset classes haven’t missed a beat during the pandemic while others have experienced immense disruption.2 As such, it may make sense to recalibrate your portfolio to ensure you’re not overexposed to certain areas of the market and underweight in others.
3. Roth IRA conversion: If you’d like to do a Roth conversion during the current tax year, you have until Dec. 31, 2020 to do so.3 It’s likely tax rates aren’t headed any lower with the new presidential administration, so it is worth considering under the right circumstances.4 We recommend consulting your advisor on the best course of action.
4. Estimated tax payments: If you’re self-employed or don’t have taxes withheld from other sources of taxable income, you have until Jan. 15, 2021 to pay your fourth-quarter estimated taxes. You do not have to meet this deadline if you file your 2020 tax return by Feb. 1, 2021 (this is difficult to do with reports mailed so late) and pay the entire balance due with your return.5
5. Year-end gifting: If you make charitable contributions, consider donating securities that have experienced significant gains this year. Not only does this support a valuable cause, but it also has tax advantages. Gifting appreciated stock avoids capital gains taxes for you and the recipient and makes you eligible for a potential income tax charitable deduction.6 Giving can also be done directly from an independent retirement account (IRA).7
We understand December marks a busy time, which is why we’re here to help with your year-end financial planning. If you have any questions, please contact your Exencial advisor as soon as possible.
1. Investopedia (6/29/20) – Tax-Loss harvesting definition
2. Business Insider (11/21/20) – The K-shaped economic recovery dividing America also applies to companies. Here are 4 implications of that trend, according to a Wall Street chief strategist.
3. NerdWallet (10/23/20) – How to do a Roth IRA conversion in 3 steps
4. Tax Foundation (10/22/20) – Details and analysis of President-elect Joe Biden’s tax plan
5. Kiplinger (9/11/20) – When are 2020 estimated tax payments due?
6. Schwab Charitable (5/21/20) – Benefits of donating publicly traded securities to charity
7. Investopedia (10/29/20) – Donating to charity using money from an IRA
PAST PERFORMANCE IS NOT AN INDICATION OF FUTURE RETURNS. Information and opinions provided herein reflect the views of the author as of the publication date of this informational piece. Such views and opinions are subject to change at any point and without notice. Some of the information provided herein was obtained from third-party sources believed to be reliable but such information is not guaranteed to be accurate. In addition, the links provided within are for convenience only and the provision of the links does not imply any sponsorship, endorsement, or approval of any of the content. We do not guarantee the content or its accuracy and completeness. The content is being provided for informational purposes only, and nothing within is, or is intended to constitute, investment, tax, or legal advice or a recommendation to buy or sell any types of securities or investments. The author has not taken into account the investment objectives, financial situation, or particular needs of any individual investor. Any forward-looking statements or forecasts are based on assumptions only, and actual results are expected to vary from any such statements or forecasts. No reliance should be placed on any such statements or forecasts when making any investment decision. Any assumptions and projections displayed are estimates, hypothetical in nature, and meant to serve solely as a guideline. No investment decision should be made based solely on any information provided herein and the author is not responsible for the consequences of any decisions or actions taken as a result of information being provided herein. There is a risk of loss from an investment in securities, including the risk of total loss of principal, which an investor will need to be prepared to bear. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will be profitable or suitable for a particular investor’s financial situation or risk tolerance. Exencial Wealth Advisors, LLC (“EWA”) is an investment adviser registered with the Securities & Exchange Commission (SEC). However, such registration does not imply a certain level of skill or training and no inference to the contrary should be made. EWA may only transact business in those states in which it is registered, notice filed, or qualifies for an exemption or exclusion from registration or notice filing requirements. Complete information about our services and fees is contained in our Form ADV Part 2A (Disclosure Brochure), a copy of which can be obtained at www.adviserinfo.sec.gov or by calling us at 888-478-1971