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Making A Year-End Financial Plan

Making A Year-End Financial Plan

The weeks between Thanksgiving and New Year’s are busy, but can be a great time to plan. As the year winds down, it’s time to get your documents in order and make strategic decisions for your taxes and financial plans.  

Tax Planning Opportunities

  • If you have control over your income for 2022 and 2023, now is the time to figure out if you want more or less income in 2022 or if you want to move it into 2023. 
  • Most taxpayers will take the standard deduction amount (this limit varies by age and filing status), but if you plan to itemize, be sure you have enough in all Schedule A deductions to get over the limit.  

Here are a few issues to consider in this area: 

  • If you think you owe state taxes for 2022 when you complete your return and need the deduction as part of your Schedule A Itemized Deductions for 2022, make an estimated deposit to the state before December 31 because you get the deduction in the year you make the payment. If you are not itemizing for 2022, make this payment in January 2023 for the 2022 taxes. 
  • If you make charitable contributions, decide whether to make them this year or next. If you are itemizing for 2022, date and mail the checks (via USPS) by December 31, 2022.  
  • This might be a good time to do house cleaning and donate things you don’t need. Make a list, document the values, and get the items to the charity of your choice. Is documenting worth all of the effort? Yes, if you plan to itemize. In 2020, taxpayers claimed itemized deductions on only 9.5% of all returns filed, according to IRS Publication 1304. The total itemized deductions averaged $39,105 for 2020. However, if there is a possibility you might itemize, then save that receipt! 

Retirement Accounts 
Apart from planning your deductions, now is a great time to plan retirement account contributions for 2023. You may make your deferral election through your plan administrator (usually Human Resources). 

In 2022, you give tax-free gifts of up to $16,000 to any individual. If you are interested in helping family members fund their retirement plans, gifting up to $6,000 to support their Roth IRAs contributions becomes a much more valuable gift over time. For example, a Roth IRA valued at $6,000 today invested in a fund that compounds 8% annually grows to more than $130,000 in 40 years. 

Gifts into 529 plans provide tax incentives, although these vary by state. For example, Indiana taxpayers are eligible for a 20% state income tax credit of up to $1,000 yearly on their contributions to CollegeChoice 529 accounts.

Meet with Your Financial Advisor 
If you have questions or need help with your specific situation, schedule time to visit with your financial advisor. If you are not working with an advisor, consider scheduling an introductory call with one of the advisors at Hurlow Wealth Management Group. For over two decades, the fiduciary financial advisors at Hurlow Wealth Management Group have helped clients find clarity, feel confident, and achieve comfort in retirement.

Services offered through Hurlow Wealth Management Group, Inc., a Registered Investment Adviser. Hurlow Wealth Management Group, Inc. does not provide tax, legal or accounting advice.  Advisory services are only offered to clients or prospective clients where Hurlow Wealth Management Group, Inc. and its representatives are properly licensed or exempt from licensure.  Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. No advice may be rendered by Hurlow Wealth Management Group, Inc. unless a client service agreement is in place. 

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