2022 is almost upon us and that means one thing… a new tax year!

We can plan now to take advantage of this window of opportunity. We can see what 2021 looks like and compare what our 2022 will likely look like, then act accordingly.

For Taxable Investments

Tax loss harvesting

Simply put, tax loss harvesting is selling assets that have lost value to offset against selling assets that have gains. This decreases your taxable gain (gains that are subject to taxation) or can be applied to your tax return.

While losing value on your investments is never fun or the plan, the situation provides an opportunity tax wise.

Reset crypto basis

Crypto is currently seen as property and therefore not subject to wash sales.

If we are happy to take/realize gains and pay taxes now or offset them against tax loss harvests, our future tax bills are likely lower due to showing a higher cost basis. Simply sell the position then purchase it right back up!

For Retirement Account Investments

Retirement Account Investments = Favorable to lowering your taxes

Traditional IRA / Retirement account contributions

Traditional IRAs and retirement account contributions are made pre-tax. Meaning these come directly off your income and are not subject to taxation. This lowers your tax bill in the year of the contribution.

Roth IRA / Retirement account contributions

Roth simply means that you pay tax now, but do not pay tax in the future. If you are comfortable paying taxes now, then Roth contributions are a great option.

Since Traditional + Roth are tax neutral (you pay the same in taxes regardless) if you maintain the same tax bracket, a good rule of thumb is to ask yourself if you will be in higher or lower tax bracket compared to when you plan to take distributions from the account.

For Optimizing Your Tax Triangle

Health Savings Account (HSA)

It’s preferable to have future flexibility.

If you have a high deductible health insurance plan ($1,400 deductible/spouse), then you’re able to contribute into a health savings account and get its triple tax benefits.

Roth IRA Conversation (Bracket topping)

A common strategy with financial advisors and CPAs is to “bracket top”. This simply means you’ll convert portions of traditional retirement funds (IRA, 401k, 403b, etc.) into a Roth IRA up to the next marginal tax bracket.

E.g. pay tax at 12%, but stop just shy of moving into the 24% tax bracket. (Find annual tax rates in easy to reach situation at The Tax Foundation)

 

The views expressed represent the opinion of Sequoia Financial Group. The views are subject to change and are not intended as a forecast or guarantee of future results. This material is for informational purposes only. It does not constitute investment advice and is not intended as an endorsement of any specific investment. Stated information is derived from proprietary and nonproprietary sources that have not been independently verified for accuracy or completeness. While Sequoia believes the information to be accurate and reliable, we do not claim or have responsibility for its completeness, accuracy, or reliability. Statements of future expectations, estimates, projections, and other forward-looking statements are based on available information and Sequoia’s view as of the time of these statements. Accordingly, such statements are inherently speculative as they are based on assumptions that may involve known and unknown risks and uncertainties. Actual results, performance or events may differ materially from those expressed or implied in such statements. Investing in equity securities involves risks, including the potential loss of principal. While equities may offer the potential for greater long-term growth than most debt securities, they generally have higher volatility. Past performance is not an indication of future results. Investment advisory services offered through Sequoia Financial Advisors, LLC, an SEC Registered Investment Advisor. Registration as an investment advisor does not imply a certain level of skill or training.

The views expressed represent the opinion of Sequoia Financial Group. The views are subject to change and are not intended as a forecast or guarantee of future results. This material is for informational purposes only. It does not constitute investment advice and is not intended as an endorsement of any specific investment. Stated information is derived from proprietary and nonproprietary sources that have not been independently verified for accuracy or completeness. While Sequoia believes the information to be accurate and reliable, we do not claim or have responsibility for its completeness, accuracy, or reliability. Statements of future expectations, estimates, projections, and other forward-looking statements are based on available information and Sequoia’s view as of the time of these statements. Accordingly, such statements are inherently speculative as they are based on assumptions that may involve known and unknown risks and uncertainties. Actual results, performance or events may differ materially from those expressed or implied in such statements. Investing in equity securities involves risks, including the potential loss of principal. While equities may offer the potential for greater long-term growth than most debt securities, they generally have higher volatility. Past performance is not an indication of future results. Investment advisory services offered through Sequoia Financial Advisors, LLC, an SEC Registered Investment Advisor. Registration as an investment advisor does not imply a certain level of skill or training.

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Investment advisory services offered through Sequoia Financial Advisors, LLC, an SEC Registered Investment Advisor. Registration as an investment advisor does not imply a certain level of skill or training.

Tax Planning Before The New Year: 6 Things to think about going into the new tax year | Sequoia Financial Group

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