Tax and Financial Planning Considerations before Year-end

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A-woman's-hand-is-writing-in-empty-spiral-notepad-with-a-penThe end of the year marks one of the most critical times for investors, as they face many decisions that impact their overall financial planning. This year brings challenges, from market volatility and inflation to geopolitical issues. To help you navigate these uncertain times, we’ve summarized the key strategies to review and implement before the new year. Please consult with your financial and tax advisors before making any important financial decisions. 

Income Tax Strategies

  • To avoid unpleasant surprises and penalties at tax time, consider increasing your withholding if you have underestimated tax payments or anticipate a year-end bonus.
  • RMDs represent the minimum amount you must withdraw from your tax-deferred retirement accounts (traditional IRAs, 401(k), 403(b) and other employer-sponsored retirement plans) each year. Your amount is calculated by dividing the prior December 31 account balance by a life expectancy factor, as determined by the IRS. If you are over the age of 72, you must take your yearly RMD by December 31 (April 1 of the year after you turn 72). The distributions are treated as income and taxed at your current tax rate. Please note, a 50% penalty is applied to any RMDs not taken by year-end.
  • RMDs must also be taken from the inherited retirement accounts received before 2020. Currently, the IRS is waiving the penalties on missed RMDs from inherited retirement accounts for 2021 and 2022. For the non-eligible designated beneficiaries, who inherited the accounts after 2019, you have to fully distribute the accounts within 10 years.
  • You can contribute and defer up to $20,500 if you are under the age of 50 and up to $27,000 if you are older than 50.
  • If available, you might consider contributing to a Roth 401(k) if you are in a lower tax bracket now than you expect to be in the future. The total contribution limit for both pre-tax 401(k) and Roth 401(k) combined is $20,500, with an additional $7,500 in catch-up contributions for those who are over the age of 50.
  • You can contribute up to $6,000 to a traditional IRA and $6,000 to your spouse’s IRA. If you are older than 50, you can contribute an additional $1,000.
  • Consider contributing to a Roth IRA if your income is under the applicable earning limits. You may contribute up to $6,000 (or $7,000 if you’re older than 50). The total contribution limit for both traditional IRAs and Roth IRAs combined is $6,000 (or $7,000 if you are older than 50).
  • If your income is over the Roth earning limits and you do not have a traditional IRA, you might decide to make a nondeductible contribution (up to the IRA contribution limit) to a traditional IRA, then immediately convert it to a Roth IRA.   
  • Consider converting from a traditional IRA to a Roth IRA if you are in a low marginal income tax bracket. Partial conversion is allowed as well.
  • HSAs offer triple-tax benefits including pre-tax contributions, tax-deferred growth and tax-free distributions on eligible medical expenses. Anyone can contribute to an HSA as long as they are enrolled in a qualified High Deductible Health Plan (HDHP). For the plan year 2022, the minimum deductible for an HDHP is $1,400 for an individual and $2,800 for a family. If eligible, you can contribute and deduct up to $3,650 for self-coverage and $7,300 for family coverage. Those who are 55 and older can contribute an additional $1,000 as a catch-up contribution. If you have any children that are no longer dependents but are under the age of 26 and on your health insurance plan, they can contribute up to $7,300 to their own HSA.
  • Please refer to for your state-specific tax saving benefits.
  • For example, Indiana taxpayers can get a state income tax credit equal to 20%, up to $500, ($1,000 for married filers) of their yearly contributions to a CollegeChoice 529 account. Illinois taxpayers can deduct up to $10,000 on state income tax for a single filer ($20,000 for married filers).
  • Form 1099-K reports business transactions you received from third-party services, like PayPal, Venmo, Upwork or eBay, and must be included as income on your tax return. The minimum threshold has been lowered from $20,000 to $600 in 2022.
  • Effective in 2023 under the Inflation Reduction Act, individuals can earn a credit for 30% (maximum of $1,200 per individual) of annual improvements/expenditures made on energy efficient home improvements (up from 10%).
  • Also under the Act, specific item improvements on residential properties qualify for credits. This includes windows, skylights, heat pumps and more.

Tax-related Investment Strategies

  • Evaluate your portfolio and consider harvesting your losses by selling taxable investments. Carryover losses can be used to offset future gains.
  • You may wish to harvest gains by selling taxable investments if you have capital loss carryovers or year-to-date losses for the current year.  
  • You may consider leveraging investment vehicles, such as municipal bonds or REITs, which offer tax advantageous benefits.
  • The wash sale rules prohibit the selling of an investment for a loss and replacing it with the same or “substantially identical” investment 30 calendar days before or after the sale. If you are affected by the wash sale rule, your investment loss (excluding cryptocurrencies) cannot be claimed for tax purposes.

Charitable Giving Tax Strategies

  • Make a charitable donation by December 31 and remember to keep all of your receipts from the recipient charity. 
  • This approach helps you maximize your charitable deduction while potentially avoiding income tax on the built-in gain in the stock. 
  • Maximize your itemized deduction by bunching donations into a single year if your itemized deductions will be slightly below the level of the standard deduction.
  • By using a DAF, you can receive an immediate tax deduction to allow you to be more strategic about your giving decisions. It is also a great vehicle to bunch contributions efficiently.
  • If you are over the age of 70 ½, you can donate up to $100,000 per year from your IRA to a qualified charity or charities. These payments, or QCDs, can be counted toward meeting your RMDs for the year without pushing you into a higher income tax bracket. 

Gift and Estate Tax Strategies

  • Consider gifting up to $16,000 per person, as allowed under the federal annual gift tax exclusion. The gifts do not affect your overall gift and estate exemption of $12.06 million.
  • It is recommended to review and update your will, trusts, healthcare directives and power of attorney documents every three to five years or immediately after a life-changing event.
  • While you do not need to update your retirement account beneficiary designations every year, it is critical to review it and update regularly, especially after major life events, such as the death of a spouse, marriage or divorce, and the birth or adoption of a child.
  • The lifetime exemption is an amount of property or cash you can give away throughout your life without having to pay a gift tax. The current lifetime gift exemption is $12.06 million and is expected to drop to $6 million by 2026.

Planning for 2023

As we prepare to leave 2022 behind us and look toward 2023, it’s important to review your financial plans and update tax strategies to optimize your portfolios. We have a team of tax experts and financial planners to help actualize these strategies and personalize your financial goals for the future you have envisioned.

To speak to our team of tax experts and financial planners, please contact us:

About our authors

Thao Ring

Thao Ring

Thao Ring, CFP®, is a financial advisor with over 17 years of experience in financial planning and wealth management. Thao specializes in helping clients through all stages of the financial planning process. Working closely with individuals, families and small businesses, she provides comprehensive financial planning, investment portfolio management, retirement income planning and estate planning solutions uniquely designed to meet specific, individual needs.

Tom Bayer

Tom Bayer

Thomas Bayer, CPA, CExP, has 30 years of experience providing a broad range of accounting, tax and business advisory services to commercial clients across various industries. Tom has specialized expertise in the areas of tax planning and compliance, business advisory services and business succession planning.

Investment advisory services offered through Sikich Financial, an SEC Registered Investment Advisor. Thao Ring is an Investment Advisor Representative of Sikich Financial. Sikich Financial does not provide tax or legal advice. The information presented here is not specific to any individual’s personal circumstances. Each individual should seek independent advice from a tax professional based on his or her individual circumstances.

This publication contains general information only and Sikich is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or any other professional advice or services. This publication is not a substitute for such professional advice or services, nor should you use it as a basis for any decision, action or omission that may affect you or your business. Before making any decision, taking any action or omitting an action that may affect you or your business, you should consult a qualified professional advisor. In addition, this publication may contain certain content generated by an artificial intelligence (AI) language model. You acknowledge that Sikich shall not be responsible for any loss sustained by you or any person who relies on this publication.


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