Year-end tax considerations

By Martin Spears, Financial Advisor, RJFS and Managing Partner Operations, Southern Springs Capital Group

Can it really be November? With unseasonably high temperatures, a Presidential election and the ongoing COVID-19 situation, there has been plenty to help you lose track of time this year.

But with the end of the year fast approaching, now is a good time to start thinking about your tax strategy. Preparing for tax season now will help you when it’s time to file, and it will keep your portfolio aligned with your short- and long-term goals.

Here are a few things to keep in mind as the tax year comes to a close.

For Individuals

Consider using tax-advantaged accounts to help lower your tax bill. One key to lowering your tax obligation is really quite simple: Report lower taxable income. Since few of us actually want to earn less, the next option is to put as much income as possible into tax-advantaged accounts.

• If you haven’t contributed the maximum amount to a qualified retirement plan at work throughout 2020, consider adding money before it is too late. Contribution limits for 401(k) and other retirement plans for the 2020 tax year are $19,000 or $25,000 if you’re 50 or older.
• Also consider saving on a pre-tax basis for healthcare. You can accumulate funds on a tax-deferred basis to pay for healthcare expenses through either a health savings account (HSA) or flexible savings account (FSA). Your workplace may offer one or both of these options, so check with your employer.

You may also be able to set up an HSA through a financial services firm; we offer them at Raymond James.

For Business Owners

For business owners, there are many opportunities designed to alleviate your tax burden. Here are a few things to consider.

• Did you buy equipment? Take a deduction.
• Defer income and accelerate deductions.
• Deduct vehicle expenses

Charitable Giving

One of the things we enjoy at year-end is helping our clients facilitate gifts to organizations and charities that they are passionate about. As a reminder, there are a few different ways to make those gifts.

• Write a check. This is one of the easiest ways to gift, especially for those who give sporadically to a limited number of charities.
• Donate appreciated stocks. Doing so means you’ll receive an immediate tax deduction and can help you avoid paying capital gains tax on the appreciated portion of their value. Gifts also have the potential to reduce future estate taxes. In most instances, these stocks can be transferred directly to the charity from your account.
• Donor-advised funds (DAFs). Think of this as a charitable checking account. DAFs combine the ease of direct giving with the benefits of a private foundation – with less work and time commitment. Because the funds are sponsored by a charitable organization, donors avoid the cost and upkeep of creating a foundation, but still have a hand in the grant-making decisions and can even name the fund itself. To get started, you make an irrevocable contribution (e.g., cash or marketable securities) to the fund. You take an immediate tax deduction, subject to income limitations; the fund sells and reinvests the assets, and you help direct when and how the proceeds are used, often with a few simple clicks online.*

While these are by no means exhaustive, they should be enough to get you started when it comes to tax-saving tactics that could work for you and your business.

For more information on Southern Springs Capital Group, visit www.southernspringscapital.com. Our offices are located at 2555 Meridian Boulevard in Franklin. We can be reached at 615-905-4819.

Any opinions are those of Southern Springs Capital and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Individual investor's results will vary. Past performance does not guarantee future results. Raymond James does not provide tax or legal services. Please discuss these matters with the appropriate professional.

* Donors are urged to consult their attorneys, accountants or tax advisors with respect to questions relating to the deductibility of various types of contributions to a Donor Advised Fund for federal and state tax purposes. To learn more about the potential risks and benefits of Donor Advised Funds, please contact Raymond James. Raymond James financial advisors do not render advice on tax or legal matters. You should discuss any tax or legal matters with the appropriate professional.

Securities offered through Raymond James Financial Services, Inc., member FINRA / SIPC. Investment advisory services offered through Raymond James Financial Services Advisors, Inc. Southern Springs Capital Group is not a registered broker/dealer, and is independent of Raymond James Financial Services.