These are the seven areas of your financial picture that you need to consider optimizing before year end, particularly after yet another tumultuous year. Not only was the stock market fairly volatile — there were highly atypical tax regulation changes due to the pandemic as well. The combination of those means that there is going to be a lot of complexity to account for as you look back on the year. And although no new tax laws have been enacted yet by the Biden administration, it’s good to be aware of  the proposals routing through Congress.

1. Tax-loss harvesting: Offset capital gains by selling investments

Paying taxes on investment gains can be a financial burden, but tax loss harvesting can reduce your bill.

Tax loss harvesting involves selling losing investments to offset capital gains, thus limiting the taxes you owe. While it doesn’t always make sense to take a loss on investments, evaluate your portfolio and consider whether selling some poorly performing assets may make sense in your situation.

2. Max out your retirement contributions

Ensure you are utilizing tax-advantaged retirement accounts such as IRAs and your company’s 401(k), which are effectively free funds from the government to help you save for retirement.

Note, you actually have until Tax Day of 2022 to make these contributions but you should act ASAP to avoid forever forgoing the chance to make a 2021 contribution.

If you’ve already maxed out a 401(k) and IRA, you may also wish to explore investing in a health savings account (HSA) provided you have a qualifying high-deductible health plan. Contributions can be deducted from taxable income and withdrawals can be made tax-free from these accounts as long as funds are used for qualifying healthcare expenses.

3. Gifting to friends and family

While a gift tax is charged on those who make large gifts, you’re allowed to make gifts of up to $15,000 per recipient in 2021 without any federal gift tax being assessed. Gifting funds during your lifetime can reduce your taxable estate upon your death, so consider taking advantage of the opportunity to make a gift this year.

One especially beneficial way to gift funds is to invest in a 529 account. These accounts can be used to pay qualifying educational expenses, including K-12 expenses and costs associated with college. Many states provide tax benefits for 529 contributions, and earnings from a 529 aren’t subject to federal tax when used to pay for eligible schooling-related costs.

Related article: Tax Strategy: Gifting Assets

4. Charitable giving

When tax reform passed in 2017, a substantial increase to the standard deduction meant many more families will now claim this deduction rather than itemizing. Unfortunately, choosing not to itemize means giving up the opportunity to claim a deduction for charitable giving. For 2021, if you take the standard deduction you can deduct up to $300 of cash donations to charity. For married couples that rises to $600 ($300/person) for your 2021 tax return.

One option if you wish to remain eligible for a deduction for donations is to bundle contributions. This would mean that instead of making smaller contributions over several years, you could make one large donation in one year so the amount of the donation exceeds the standard deduction. As the end of the year approaches, consider whether this strategy may make sense and whether this is a year you’ll itemize.

Another option is donating appreciated stock. Donating appreciated stock directly to a charitable organization means you avoid paying the capital gains tax. Additionally, you can claim the entire fair market value of the stock as a charitable donation instead of whatever’s left after paying the capital gains tax. With the Biden administration considering raising the long-term capital gains tax, it might be a route worth exploring.

Related article: Tax Benefits of a Donor-Advised Fund

5. Estate planning

The end of the year is a common time to take stock of your long term estate planning. Evaluate your estate plan and assess whether you have sufficient life insurance; whether assets are protected from potential loss, such as costs of long-term care; and whether you’ve made appropriate plans to provide for the needs of your beneficiaries in the long term.

6. Work from home and remote work changes

Start collecting records of any temporary relocations (work from home/remote working due to Coronavirus). You may have temporarily stayed in a different state or city than usual, and that could affect your tax liability for the year. Careful records can help make sure that you have all the information and documentation you need for when you file.

7. Withholding checkup

Now is a good time to review the total amount of taxes withheld from your paycheck in 2021. If you owed taxes for 2020 and it looks like you might owe again, you should file a new W-4 with your employer and start withholding more taxes from your paychecks heading into the new year. This won’t alleviate your tax bill but it can prevent any scares (or penalties) when it’s time to file for 2022.


The right financial advisory, tax, and trust & estate firms can work with you to identify all the right opportunities to maximize your finances. Now is the optimal time to get the best team in place to help you. We’ll set you up with complimentary conversations with each advisory firm in order to help you ultimately select the right one. Get started here.