Year-End Financial To-Do: Should You Take or Defer Gains and Deductions This Year?

Nov 15, 2023

By Jeffrey R. Wolfe, Esq., Senior Vice President, Manager of Wealth Planning Strategies

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Year End Gains - 2023

As we roll toward the end of the year, markets continue to fluctuate. War has broken out in the Middle East, and Congress continues to struggle to reach agreements on things as simple as keeping the government open. These events, coupled with year-end planning, make now a great time to look at your portfolio to see if there may be opportunities to pay less taxes or pay taxes at a lower rate. Review your portfolio and your other investments, along with your projected income, to see where you may find yourself on the tax bracket spectrum. Once you’ve estimated where you are, work with your tax advisor to see whether you should take or defer certain gains or deductions in this year or the next.

For example, you may be able to take a gain on an investment this year or postpone it until January. If you think your tax rate will be lower next year, it may make sense to postpone the gain until 2024. Similarly, if you are considering making a charitable donation and you expect your income (and tax rate) to be lower next year, consider making the donation this year to offset your higher tax rate for this year. If you pay state estimated taxes, you could make your last quarterly payment in December rather than January to take the deduction this year. Ultimately, if you can control when to take a gain or deduction, choosing the appropriate time to take such actions can help you control your potential tax liability year over year.

Given the continued high standard deductions in 2024, these techniques are especially critical to review this year end. Recall that the standard deductions for 2023 are $13,850 filing single; $27,700 married filing jointly. However, the 2024 deductions leap to $14,600 single/$29,200 married and itemized deductions remain limited as well. Charitable gifts, mortgage interest and state and local taxes (with a cap on state and local deductions being $10,000), comprise most itemized deductions. Accordingly, you may want to review your options to determine if taking or deferring gains or deductions may be affected by these large standard deductions.

These are complicated and time-sensitive decisions. Please remember Benjamin F. Edwards does not provide tax advice, so it is important to consult with your tax professional for guidance tailored to your specific situation. Doing so may lessen the tax blow for this year and the year to come.

IMPORTANT DISCLOSURES: The information provided is based on internal and external sources that are considered reliable; however, the accuracy of this information is not guaranteed. This piece is intended to provide accurate information regarding the subject matter discussed. It is made available with the understanding that Benjamin F. Edwards is not engaged in rendering legal, accounting or tax preparation services. Specific questions on taxes or legal matters as they relate to your individual situation should be directed to your tax or legal professional.