The end of the year often has people feeling reflective about the year that they’ve had and contemplative about the year ahead. While you’re thinking about how 2022 treated you, it’s a great time to think about financial steps to take at the end of the year — from reviewing your retirement plan to evaluating how well insured you are — and to take those steps now to start 2023 with your best foot forward.
Financial Step #1: Donate to Charity
The holiday season is synonymous with charitable giving. If you’re in the giving spirit this season, be sure to keep track of your donations and keep your receipts. If you itemize your deductions on your tax return, you can claim those donations to lower your tax bill.
It’s worth noting that a check dated prior to Dec. 31, even if it is cashed in the new year, still counts toward this year’s deduction. The same thing is true for any donations that you charge to your credit card and then pay off next year — they count toward this year’s deduction if the charge was made in 2022. Also, keep in mind that you can gift your stock to charities, avoiding any capital gains for yourself.
Financial Step #2: Estimate Capital Gains and Other Taxes
Speaking of capital gains, the last year surprised many people with unexpected capital gains. While you may not have that same experience in 2023, it’s a good idea to sit down with a tax professional and a financial adviser to estimate what your tax year might look like so that you can plan ahead, not only for capital gains, but for other estimated taxes. It’s best to be prepared, and potentially to make estimated payments on your taxes if necessary.
Financial Step #3: Consider a Roth Conversion
A Roth IRA conversion might be the right financial move for you this year, depending on your situation. It is a unique year because markets are down, and when they rebound, you’ll end up with more shares that could potentially grow in a tax-free vehicle. A financial planner can help you determine if a conversion is the right move for your situation.
