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Year-End Financial Planning Checklist - 2023

As we approach the end of 2023, it's an opportune time for our TOP 10 Year-End Financial Planning Review. Year-end reviews are crucial for assessing your financial health, identifying areas for improvement and setting the stage for a prosperous future.  

In this blog, we'll review the TOP 10 financial planning items you should consider before 2023 comes to a close. 

  1. Confirm Required Minimum Distributions (RMD) are met: The recent distribution changes via the SECURE Acts have caused a lot of confusion. In order to AVOID PENALTIES, you should review all your retirement accounts, including any Inherited IRAs (very important!).  With Inherited IRA’s in particular, there are tax strategies to be considered that are easily overlooked! Ensure that mandatory distributions are complete before December 31st. 
  1. Review Year-End Contributions: 
    1. Salary Deferrals – Individuals can contribute up to $22,500 in a 401k/403b, plus an additional $7,500 for those over 50; 
    2. 529 Plans – Contribute to receive tax deductions where applicable; for example NY and NJ (NJ subject to income limit);
    3. Gifts – Annual exclusion gifts (up to $17,000) must be complete by year-end. 
  1. Tax-Loss Harvesting: Review your investment portfolio for YTD REALIZED capital gains; this should include capital gain distributions (from mutual funds) which can fall through the cracks and cause a tax liability. Consider selling positions which have capital losses, which, in turn, can help offset capital gains.  BE CAREFUL to consider state income tax rules when realizing losses; states like New York DO NOT allow you to carry forward capital losses that are not used in the current year! In addition, be mindful of the Wash Sale rule! Again, there are numerous tax strategies here to consider to minimize taxes due. Asset LOCATION  (what types of accounts own what types of assets) is an underappreciated tax strategy as well.  
  1. Consider Year-End Roth Conversions: If 2023 will be a low marginal tax rate year, consider converting some pre-tax retirement assets to ROTH assets. However, remember to consider other factors such as the Income Related Monthly Adjustment Amount for Medicare Premiums (“IRMAA”) & Premium Assistance Tax Credits before moving ahead with a Roth conversion that will increase your taxable income. 
  1. Tax Planning: Review your current tax situation and identify potential opportunities for tax savings. In short, if your income will likely be higher in 2024, consider pushing out your deductions (e.g., charitable contributions) to 2024, as they will be more valuable. 
  1. Charitable Planning: Consider making tax-deductible contributions to charities. In most cases, it may be more advantageous to use a gift of appreciated stock (must have been held for more than 12 months) instead of cash in order to leverage your gift by avoiding capital gains taxes. You can also contribute to a “Donor-Advised Fund” with stock or cash which allows you to front-load your tax-deductions in a high-income year; you will then be able to make distributions to the charity of your choice in future years. 
  1. Consider Tax Credits: If you purchased an EV (electric vehicle), you may be able to benefit from a tax credit of up to $7,500 for a new vehicle or up to $4,000 for a used vehicle. You can search the following link for NEW vehicle tax information  (https://fueleconomy.gov/feg/tax2023.shtml); this one for USED vehicles (https://www.fueleconomy.gov/feg/taxused.shtml). In addition, you may qualify for “Home Energy Tax Credits” if you installed solar panels, solar-power water heaters, fuel cells, new exterior doors/windows, etc. 
  1. Estate Planning Review: Ensure your estate plan is up-to-date and reflects your current wishes. Review beneficiaries, update your will and consider establishing/updating trusts if needed. Proper estate planning provides financial security for your loved ones and can even reduce estate taxes in the future! 
  1. Review Your Financial Plan: Begin by revisiting your financial plan to ensure it aligns with your current financial situation and objectives. This may include a review of your goals—both financial and personal, as well as an evaluation of your spending patterns and savings targets. Now is a good time to make adjustments for the upcoming year. And of course, most importantly, if you don’t have a plan – MAKE ONE! 
  1. Other Items:
    1. Spend FSA dollars to avoid losing them!
    2. Consider hiring your children in 2024… (may lower your taxable income) 
    3. Consider tax planning before 2017 Tax Act benefits expire in 2026! (We will discuss this in a future blog…)

Summary:  A thorough year-end financial review is a proactive approach to maintaining financial stability and achieving long-term goals. By addressing the aforementioned 10 year-end financial planning items, you can better position yourself for success in the coming year and beyond. 

Remember, financial planning is an ongoing process, and regular assessments are essential to adapting to life's changes and uncertainties. 

We look forward to hearing your thoughts and questions.

All the best,

NCM Capital Management

Disclosures: This is not an offer or solicitation for the purchase or sale of any security or asset. While the information presented herein is believed to be reliable, no representation or warranty is made concerning its accuracy. The views expressed are those of NCM Capital Management, LLC and are subject to change at any time based on market and other conditions and NCM does not undertake to update or supplement its newsletter or any of the information contained therein. Past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will be profitable. There is no guarantee that the investment strategies discussed above will work under all market conditions or are suitable for all investors and each investor should evaluate their ability to invest long-term, especially during periods of downturn in the market. Investors should consult their investment professional prior to making an investment decision. Investment advisory services are offered through NCM Capital Management, LLC, an SEC-registered wealth advisory firm domiciled in New Jersey. This communication is not to be construed or interpreted as a solicitation or offer to sell investment advisory services.  For additional information about NCM Capital Management, LLC, you may request a copy of our disclosure statement as set forth on Form ADV. Readers are encouraged to consult with their own professional advisers, including investment advisers and tax/legal advisors. NCM Capital Management, LLC does not provide legal or tax advice. NCM Capital Management, LLC can assist in determining a suitable investing approach for individuals, which may or may not resemble the strategies outlined herein.