I am so thankful every year to disconnect around the holidays and this year is no exception.

Among the many traditions of the holidays, one has to be navigating our complex tax system. :)

Every year there are a number of end of year activities to consider. They are irregular (as they happen annual) and complex. So they warrant a checklist to remember what should be considered. This is written for myself but sharing publicly if helpful for others.

For additional context, see my Personal Finance Advice post.

Tax Loss Harvesting

Sell stock and fund holdings that have capital losses to offset capital gains or take advantage of $3k offset to ordinary income. Note: losses in excess of $3k carry over year to year indefinitely and can be applied to future gains.

Capture gains in children's UTMA / UGMA accounts

In 2021, first $1250 of gains is tax free (and don't need to file taxes) and next $1250 is tax advantaged source.

Consider extra donations if itemizing deductions

Common itemized deductions are:

  1. State & local taxes up to $10k
  2. Mortgage Interest
  3. Charitable contributions

If these are above the standard deduction ($24,800 in 2020) then you are likely itemizing your deductions. Additional contributions to charity should help reduce taxable income. If you don't know where to donate right away I highly recommend a charitable fund like Schwab Charitable. Also, if possible, donate stock that has high capital gains as opposed to donating cash. This is a tax advantaged approach as the full market value counts as a charitable contribution (the cost basis does not matter in this case). No capital gains is applied.

Updating your 401k contributions

If you your company offers matching contributions, consider the contribution percent carefully as it is possible over-fund early which limits the matching over the course of the year.