December 2023 Updates

Key Takeaways:

  1.     Tax loss harvesting strategy
    1.     Reduce quarterly income tax payments
      1.     Trim income tax withholding amount
        1.     Boost retirement savings with catch-up contributions
          1.     Defer compensation to more favorable future time
            1.     Exercise Stock Options or do a options breakeven analysis
            As the year comes to an end, now is the ideal moment to refine your financial strategy and implement steps to enhance your tax position. Below is a guide to six crucial year-end tax actions that have the potential to substantially improve your financial outlook.


            1.      Implement Tax Loss Harvesting Strategies
              1. Utilize the tax loss harvesting strategy by selling assets at a loss to offset gains. If inclined to retain the asset, wait 30 days before repurchasing to avoid the wash-sale rule and maximize tax benefits.

                  1.      Optimize Quarterly Income Tax Payments
                    1. Strategically manage quarterly income tax payments to minimize immediate outflow. Consider investing the difference in short-term options like Treasury bonds to yield potential returns.

                        1.      Trim Income Tax Withholding
                          1. Review and adjust income tax withholding to prevent overpaying taxes throughout the year. The surplus can be invested or saved in short-term options, optimizing your financial resources.

                              1.      Boost Retirement Savings with Catch-Up Contributions
                                1. Take advantage of catch-up contributions to retirement savings and ensure employer matches, aiming for an immediate 100% rate of return on your investment.

                                    1.      Defer Some Compensation for the Future
                                      1. Deferred compensation for taxes delays receiving income to a later date, helping postpone tax payments until that income is received. This strategy follows specific tax rules and involves various forms of compensation, like retirement plans or stock options, aiming for taxation at a later, potentially more favorable time.

                                          1.      Exercise Stock Options up to the AMT Breakeven
                                            1. Consider evaluating the option to exercise your company stock options by year-end, taking into account your annual income and tax bracket, potentially up to the point where it breaks even with the Alternative Minimum Tax.

                                            Implementing these year-end tax strategies not only enhances your financial position but also lays the foundation for the future. These are practical approaches to skillfully navigate the close of the year


                                            John Gallegos | Post Author
                                            More posts by John Gallegos