End of the Year Considerations for Your Finances and Your Family

Many of the financial decisions you make between now and the end of the year can have a significant effect on the taxes you will have to pay in April. Not only are there several tax planning strategies that can help you minimize what you owe next year, but many of these also have charitable giving benefits.

Here are some of the most impactful end-of-year considerations for your finances, family, and future!

Do you need guidance in your 2022 financial strategy? Schedule a consultation today!

Maximize Your Child Tax Credits

Last year families across the country received a tax credit of $2,000 for every child under seventeen. This year this tax credit was increased to $3,600 for children under six and $3,000 for children under eighteen. This dollar-for-dollar credit provides a substantial tax benefit!

To get the full credit, your total adjusted gross income (AGI) must not exceed $150,000. Every additional $1,000 you make over this limit reduces your tax credit by fifty dollars. But we want to help our clients receive as much of this tax benefit as possible. You can reduce your AGI through your pre-tax retirement vehicles, such as a traditional IRA or 401k! By funding any available IRA or 401k contributions, you can keep your AGI under the tax credit limit. 

If you received these tax credits based on the information on your last tax return but have since seen an increase in your income, you may have to return the money on your upcoming tax return. To mitigate this risk, contact an advisor today! We can help you determine how to utilize your pre-tax retirement vehicles to take advantage of this credit.

Charitable Giving to Donor-Advised Funds

Over the last several years, the S&P 500 has seen much positive growth. This year, these companies are up over 20% in gains. Because of this, many stocks, EFTs, mutual funds, and other market-related assets are highly appreciated. This substantial rise in value results in a significant tax event when you sell. 

These high-value market-related assets also work as a charitable vehicle where you can write off long-term capital gain. By donating your gains to charity, you can reduce your taxable income by increasing your itemized deductions. And, you don’t have to pay taxes on any assets held longer than one year. 

While it may not make sense for you to itemize deductions every year, this year you can deduct up to $300 contributed to a Donor Advised Fund during 2021 and $600 if you are a married couple filing a joint return. You can do this even if you do not itemize and take the standard deduction. As an added bonus, you can claim a charitable deduction for cash donations up to 100 percent of your AGI.

We want to work with you to find charitable giving strategies that support your community and the areas you are passionate about, but in a way that means you never have to “write another check” to charity. There are many tax-efficient ways to make an impact! 

Another example is taking advantage of the Alabama Accountability Act. You can donate up to half of your state tax liability to help kids in failing schools receive a better education. Learn more about this opportunity here!

Eliminate Future Taxes with Roth Conversions

Income taxes are lower today than in years past, which you can be taking advantage of! You can convert pre-tax retirement dollars from an IRA or 401K into after-tax Roth funds. Essentially you pay the taxes now, while the rates are low, and you’ll never have to pay taxes on it again. Your savings will grow tax-free!

Current tax law is set to sunset in 2025 and tax rates may increase as a result. This opportunity may not be available for long, so talk to your advisor if you want to take advantage of it now!

Gifts Through Qualified Charitable Distributions

If you’re an individual over the age of 70.5 or 72, you are required to take money out of your retirement accounts each year, known as a required minimum distribution (RMD). For many people, this can be thousands of dollars each year that you must pay taxes on. If you have a large pension or other accounts and do not need to take this RMD, paying taxes on money you’d rather not touch can be frustrating. 

However, you can donate your RMD amount directly from your retirement account to charity (Donor-Advised Funds do not qualify), and it won’t count as a deduction. You can essentially “hide” this income from your 1040 tax return. This way, you can financially support a church or ministry without adding to your taxable income. 

Reach out to an advisor if you have questions about qualified charitable donations!

Assess Your Financial Foundation

Much has changed in the last couple of years. As the year comes to an end, it’s important to look back on the past several months in the same way we look toward the future. Have there been any significant changes this year that need to be addressed? Did you have more children, get married, experience the loss of a loved one?

Do you need more insurance? Do you need to adjust your emergency fund? Did you start your own business? Have you updated your estate plan recently?

These are just a few questions that can help you evaluate your financial foundation and what needs to change as your needs have changed. How can you start the new year in the best way possible?

Be Mindful of the Future

It’s always essential to be mindful of the future, especially changes in legislation. There are currently several tax policies and proposals going around, but this doesn’t always mean that things will change. Stay informed, but talk to your advisor or accountant for a second opinion. You may already be exactly where you need to be! 

Reach out to an Advisor

If you have questions about what tax planning strategies are right for you, contact one of our advisors today! We can help you determine what end of the year considerations and giving opportunities are right for your finances and family.


Past performance may not be representative of future results.  All investments are subject to loss.  Forecasts regarding the market or economy are subject to a wide range of possible outcomes.  The views presented in this market update may prove to be inaccurate for a variety of factors.  These views are as of the date listed above and are subject to change based on changes in fundamental economic or market-related data.  Please contact your Financial Advisor in order to complete an updated risk assessment to ensure that your investment allocation is appropriate.