Reminder: 12/31/2020 tax calendar year deadline approaching
Reminder: 12/31/2020 tax calendar year deadline approaching. Be mindful of helpful tax planning tasks. Consider the following:
Can you contribute more to your employer sponsored retirement plans (401k, 403b, etc)?
- Use December pay checks as a final funding source into your tax deferred accounts if your cash flow has room. Ideas include:
- Login to your work retirement plan online or contact HR to see what can be done before the annual deadline to add more to your account
- Pro tip: if you have extra cash in a savings account, consider whether your household can contribute to your workplace retirement plan (such as a 401k, 403b, etc) to the maximum level and percentage allowable from your upcoming December pay checks and still be able to cover December expenses from cash flow and cash savings, if necessary, through the holiday.
- Remember to set a reminder in the calendar in early January to dial back the contribution to a more comfortable, even deduction of dollars per pay period - ideally keeping 2021 on track to maxing out contributions evenly if possible.
Are there expenses you can pay this year to qualify for deductions?
- This assumes you do not claim the standard deduction on your tax filings.
- The standard deduction for married filing jointly rises to $24,800 for tax year 2020, up $400 from the prior year. For single taxpayers and married individuals filing separately, the standard deduction rises to $12,400 in for 2020, up $200, and for heads of households, the standard deduction will be $18,650 for tax year 2020, up $300.
Do you make charitable donations: cash, goods, or appreciated stock into a Donor Advised Fund?
- Save or ask for a receipt from the 501c3 organization for the cash value or goods donated
- Online receipts are often available for donations even after the fact so long as the donation was made within the 2020 tax year.
- Donor Advised Funds often have a deadline sooner than 12/31 to initiate and to receive transferred in assets.
- Check with your custodian for more information to make any last minute contributions to Donor Advised Funds.
Any further visibility into potential tax issues related to the change in administration is limited.
- For instance, at the time of this newsletter, for those earning more than $400k annually there are advantages both in 2020 and in 2021 to “harvest gains,” or sell appreciated stock at current long term capital gains tax rates, though it is not yet clear if the $400k annual AGI is specifically for single filers or married filing joint filers as targeted by any future Biden administration tax policy.
Contact your advisor with your questions.
California Governor Gavin Newsom announced a new stay-at-home order December 3rd. Financial product and service providers, like SAS Financial Advisors, remain essential business under the order. In the utmost of caution, and to keep SAS employees and clients safe, we continue to offer virtual-only meetings over Zoom or other client-preferred online or phone options.
As 2020 winds down I think we will all be happy for a new year to begin. We have two events ushering in change: the new administration and the vaccine. Both have a degree of uncertainty; both will happen and result in changes. In the meantime, through this challenging year we can anticipate the bad while we continue to look more closely at the good.
American ingenuity and individualism works for us and against us. Pandemic response success depends on us, our activity together as a community. The welfare of the whole community needs to be our top priority. That involves compliance with individual acts that some people perceive as a limitation on individual rights. When federal leadership leaves us divided, Federalism unites us through regional and local governance and policies. Some communities were hit with Covid19 worse than others. Hotspots were recognized in April and May, and new cases fell, only to emerge in the summer and fall in other hotspots. Since the summer new cases never fell and continue to rise along with hospitalization rates and deaths. The vaccine provides light at the end of the restrictions and threat to our vulnerable populations.
Typical American ingenuity results in the United States delivering the best we can, especially in terms of being able to “Flex” and shift resources where they are most needed such as front line providers like hospital ICU beds and health care workers, retail food establishments, custodial staff, educators, and regular ordinary Americans. Time for reflection has increased as more time is spent at home, time more devastating for some than others. Of course being alone now is even more of a challenge. How will this year of Covid-19 impact the way Americans see our lives? Will this experience cause us to value the whole more than individuals or at least shift the American balance?
To what degree will we experience Post Covid Trauma Stress? And how will we recognize this as we recover in the workplace, in our schools, and in our communities? Will it shift government spending priorities and the role of government in our lives? This is both an opportunity and a challenge awaiting us.
The ‘stock market is not the economy’ is the answer to why stock markets set new highs. At least that’s what I am reading. However, eventually the stock market and economy meet. Ironically, in order to motivate Congress we need bad economic and stock market news. But even without bad financial news, many benefits from the CARES act will end December 31. Congress and the White House seem to be on the cusp of negotiating a relief bill-not a stimulus. Stimulus will happen in 2021. President-elect Biden says “help is on the way.” In the news, we see business leaders, and business associations coalescing around President-elect Biden and I see those movements capable of pushing Congress to act regardless of the party make-up. Biden is a deal maker and this current partisan/divided environment will certainly test his metal.
As we approach the end of 2020 it feels monumental that we made it this far. In many ways it's optimism that allowed us to make it. Monique is reminded by a song her daughter sings about a pair of explorers ‘going on a bear hunt.’ There’s a part where the pair are confronted with a river and they sing “we can’t go over it, we can’t go under it, I guess we'll just have to go through it!” That’s how the pandemic has felt. Some days it feels overwhelming, and looking back since March, we’ve come a long way. Let’s keep the collective focus on the greater good of all of us as a community, we will get through it.
Heading into year end festivities, stay kind and stay grateful for what we have and what is yet to come.