Start Thinking About Year-End Tax Planning Now

Published Wednesday, September 14, 2022 at: 8:17 AM EDT

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It’s only mid-September, but please begin to think about year-end tax planning. This is an unusual year for tax planning. Not only has the stock market been volatile but new rules about distributions from IRAs and federally qualified retirement plans (QRPs) – such as 401(k), 403(b) and defined benefit plans –became effective this year, and the newly-enacted Inflation Reduction Act also adds some planning opportunities.      

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Sweeping new rules on distributions from IRAs and federally qualified retirement plans were released February 23, 2022, and went into effect retroactively on January 1, 2022. The new rules affect required minimum distributions from IRAs, defined contribution plans, defined benefit plans, and annuity contracts. They affect distributions commencing during an employee's lifetime, and at death before the required beginning date for distributions, as well as rollovers and transfers from IRAs and QRPs. This is a complicated area of retirement tax planning, and this is an early warning in case you made some changes in your IRA in 2022 or are contemplating doing so.

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A bear market began on June 13, when the Standard Poor’s 500 stock index closed more than -20% lower than its all-time closing high on January 3.  By the close on June 16, the S&P 500 stock price bottomed with a loss of about -23% before a bear market rally broke out cutting losses by about half. For the past few weeks, however, stocks have declined again and the S&P 500 is now more than -18% below its January 3 peak. In periods of sharp ups and downs, it’s wise to consider taking a loss or realizing gains on taxable assets.

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President Joseph R. Biden, Jr., signed the Inflation Reduction Act into law on August 16, 2022. The new law contains tax breaks that you might benefit from, including a 10-year extension of rebates for buying an electric car, as well as a 30% clean energy tax credit for homeowners in the form of rebates of up to $14,000 on the purchase of energy-efficient water heaters and air conditioning equipment. You may want to consider these tax incentives if you are thinking of adding solar panels to your home or making other energy-efficient improvements before the end of the year. The Act, as originally contemplated, would have included other tax changes that did not make their way in the final legislation signed into law. Some of those provisions could yet be adopted before the end of 2022. Check our weekly financial planning updates to keep apprised as the end of the year approaches. 

Nothing contained herein is to be considered a solicitation, research material, an investment recommendation, or advice of any kind, and it is subject to change without notice. Any investments or strategies referenced herein do not take into account the investment objectives, financial situation or particular needs of any specific person. Product suitability must be independently determined for each individual investor. Tax advice always depends on your particular personal situation and preferences. You should consult the appropriate financial professional regarding your specific circumstances. The material represents an assessment of financial, economic and tax law at a specific point in time and is not intended to be a forecast of future events or a guarantee of future results. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete, and is not intended to be used as a primary basis for investment decisions. This article was written by a professional financial journalist for Advisor Products and is not intended as legal or investment advice.

This article was written by a professional financial journalist for Gebhardt Group, Inc. and is not intended as legal or investment advice.

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