CI BDF Private Wealth Tax Planning

5 Tax-planning checks that could save you cash

When tax time approaches each year, you probably start loading everything into your tax preparation software or send documents to your CPA. Many of these tax documents are mailed to you or may be available online, but what about some of the items that are tougher to keep track of? Here are five tax strategies that are often missed or not reported – and they could be keeping money out of your pocket.

1. 529 Contributions/Distributions

Other than your year-end statement, you may not receive any documentation to send to your accountant that specifically outlines the amount you contributed to 529 plans over the past year. Be sure to track down this important information and pass it along to your accountant to confirm that you’ll receive the appropriate deduction on your state income tax return.

2. Qualified charitable distributions

If you are 70 ½ years or older, you may have contributed to a qualified charity directly from your IRA, which is crucial information for your CPA to have. Custodians do not track where IRA distributions go, so your 1099-R tax form will likely show the total distribution as “taxable.” If you don’t inform your CPA that part of this distribution went to a registered charity or other qualifying nonprofit organization, you may be taxed on the total distribution.

3. Charitable contributions

If you made gifts of cash, appreciated securities or other property to qualified charitable organizations during the year, you will likely receive a letter from the organization documenting your financial gift. Be sure to pass along this information to your CPA, as these donations are not captured on an IRS form.

4. IRA contribution deduction

As a general rule, you’re allowed to make an IRA contribution for the prior year up to tax day of the subsequent year. This date is usually April 15 (but if April 15 falls on a weekend, you have until the next business day). In certain cases, you may qualify for this contribution to be tax-deductible. If you – and your spouse, if married – are not covered by an employer-sponsored retirement plan, you can deduct the full contribution to your traditional IRA no matter how much you earn. However, you’re limited in the amount you may deduct. For instance, for the 2021 tax year, the maximum allowable deduction per person was $6,000. Also, individuals 50 and older can put in an additional $1,000 as a “catch up” contribution.

5. Health Savings Account contribution deduction

Similar to the IRA deduction noted above, you have until tax day to make a deductible contribution to your Health Savings Account (HSA) for the previous tax year. However, being able to contribute first requires that your health plan be HSA-qualified. As with the IRA contribution noted above, be sure to confirm with your HSA custodian that any contributions you make post-year-end that you want to apply on your tax return are coded as a “prior year” contribution.

Hopefully, the above information on five tax-planning checks will help you send the appropriate (and complete) documentation to your CPA, providing you with a few viable options to maximize your income tax savings.


ABOUT THE AUTHOR

Josh Larson, CFP

Josh Larson, CFP

Wealth Advisor

Josh focuses on providing Advanced Planning solutions for unique and complex situations. He sits on the firm’s Financial Planning Committee, responsible for educating the BDF team to ensure each client benefits from customized proactive advice. He studied at Aurora University, earning degrees in Accounting and Business & Commerce. Josh is a CERTIFIED FINANCIAL PLANNER™ professional.



Neil Teubel, MS, CFP

Neil Teubel, MS, CFP

Partner, Director of Financial Planning, Wealth Advisor

Neil heads BDF’s Financial Planning Committee whose goal is to ensure BDF provides a best in class, proactive, and engaging financial planning experience for clients. His passion is helping executives, widows and retirees live their full lives while navigating their wealth planning complexities. Neil has his Masters in Financial planning and has frequently been named to both Forbes and Chicago Crain’s list of Top Wealth Advisors. He joined BDF in 2011 and is a member of our Executive Team.




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