November 2021 Newsletter to ClientsSubmitted by Moneywatch Advisors on November 15th, 2021
Enjoy this month’s edition that features a note about the Moneywatch Holiday Party and some advice to help you save on taxes this year.
Holiday Party: While we would love seeing all of you at our usual holiday party, we’ve decided to err on the side of caution and defer our gratification until next year. In lieu of the party, we are donating the normal expense of the party to three charities near to our hearts. First, the Lexington Public Library Foundation that helps expand the world for many across our community. Next, God’s Pantry Food Bank provides meals to those in need in 50 central and eastern Kentucky counties. Last, the Lexington Senior Center provides Lexington seniors a lively place to convene, create, compete, exercise, engage, explore, play, and make the most of life.
If you are similarly motivated, you may donate to these three organizations here:
To whom much is given, much will be required. (Luke 12:48)
End of Year Tax Strategies: As the old Monty Python expression went, now for something completely different.
Max out your retirement account contributions:
The best way to lower your tax liability is to increase your pre-tax contributions to your 403(b) or 401(k) so you get to keep your money rather than send it to Uncle Sam. Every dollar contributed will decrease your taxable income by a dollar.
The maximum allowed for 2021 for 401(k)s or 403(b)s is:
- $19,500 for those under 50 – this does not include your employer’s contributions;
- $19,500 plus $6,500 for those 50 and over;
- UK faculty and staff can also contribute those same amounts to a 457(b) plan – a great tool to save 2 years for every 1 worked;
For IRAs, those under 50 can contribute $6000 and those 50 and over may contribute $7000 – those contributions can also reduce your tax liability;
As the rules are complicated for who qualifies to make tax deductible contributions to IRAs, feel free to call us for advice first.
If you are of the age to qualify for Required Minimum Distributions (RMD), rather than taking your RMD, consider making a Qualified Charitable Distribution directly from your IRA. Employing this tactic satisfies your RMD, or part of it, and means never paying income tax on that amount – on the way into your IRA or on the way out;
Unless the total of your state and local taxes plus home mortgage interest and charitable donations exceeds the standard deduction of $25,100 for married couples or $12,550 for singles, you likely won’t receive a tax deduction for cash gifts to your favorite charities;
Tip: If your itemized deductions are close to that new standard deduction threshold, consider making some charitable contributions this year that you might otherwise make in 2022. This will help you get the most tax benefit from contributions you plan to make anyway;
You may also gift appreciated stock or mutual funds from your taxable accounts directly to a charitable organization. You may or may not receive a current-year deduction, but you will avoid paying any capital gains taxes;
Thank you for your continuing confidence.