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Year-end Financial Planning Reminders for Executives

The end of 2019 is fast approaching. Now is a great time to get going on any last minute financial planning. Here to help, are my top income tax and financial planning moves to make before December 31st. 

1. Max Fund a Health Savings Account

Health Savings Accounts remain one my favorite places to save. With pre-tax contributions, tax-free growth, and tax-free distributions for qualified medical expenses, the tax advantages are hard to beat. Don't forget there is an age 55 catch-up. 

2. Max Fund Workplace Savings Plans

Executives usually have many places to save through their company. Be sure to take stock of available options and see if it makes sense to use deferred compensation. Also, ensure you are maxing out your 401(k) and the over 50 catch-up. If your plan allows for after-tax contributions you should read my article on the Mega-Roth

3. Bundle Charitable Deductions

Given how high the standard deduction is now, lumping or bundling charitable donations in one year may make more sense. A Donor Advised Fund can help. Total itemized deductions would have to be greater than $24,000 for married couples filing jointly. Here is an example of how lumping charitable donations may make sense if you itemize your deductions: 

Source: Putnam Investments


4. Gift Appreciated Stock or Restricted Stock

Many investors give cash to charities, but the economic benefit to you may be increased if you give appreciated stock. With Growth stocks doing so well this year, now may be an opportune time to gift some of the profits instead of giving cash. Again Donor Advised Funds can help. If your plan allows it, you may also be able to gift Restricted Stock to a Donor Advised Fund. Gifting Restricted Stock or Employer Stock is a great way to diversify away from your Employer risk. 

5. Direct IRA distributions directly to a charity

An IRA provision allows taxpayers age 70½ or older to donate withdrawals, including RMDs, up to $100,000 annually directly to a qualified charity, without generating income tax. This goes for inherited IRAs as well if you are over 70 1/2. If you have parents or grandparents still alive this can make sense for them too. 

6. Review the Qualified Business Income Deduction

Own a business or you or your spouse have self-employed consulting income? The Qualified Business Income Deduction is a huge benefit for small businesses. Check with your accountant to see if you qualify. If you do, having the right retirement plan in place can help you meet the income thresholds for this deduction. 

7. Contribute to a 529 College Savings Plans

The 529 college savings plan is a great way to save for college tuition, and now up to $10k per year can be used for elementary and high school. In 2019, gifts totaling up to $15,000 per individual will qualify for the annual gift tax exclusion, that's $30k per couple. There is also a 5-year Election if you want to supercharge your 529 contributions. Individuals may contribute as much as $75,000 to a 529 plan in 2019 if they treat the contribution as if it were spread over a 5-year period. The 5-year Election must be reported on Form 709 for each of the 5 years. For example, a $50,000 529 plan deposit in 2019 can be applied as $10,000 per year, leaving $5,000 in unused annual exclusion per year. Be sure to coordinate any gifting with Insurance Trusts. The 5-year Election works great for parents and grandparents who want to get the power of tax-deferral working for them as soon as possible. 

8. Clients Only

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Everyone likes to save money on income taxes. These year-end reminders are  a step in the right direction. If you're already a client, email me for the full list. If you are not a client, but want to learn more about our  approach to financial planning, please email me for more information.