1. Take advantage of annual gift tax exclusions Noting that the gift tax annual exclusion will remain at $15,000 per person for 2021, Jeremiah Doyle, senior tax and estate planning strategist, suggested investors consider making any planned gifts by year-end, if they haven’t reached the maximum amount yet for 2020. Spouses can double the amount of that gift, to $30,000, to one recipient. But they are better off doing so from separate accounts to avoid the need to file a gift tax return, Doyle notes. (Photo: Shutterstock)
2. Keep the timing of when gift checks are cashed in mind. Pay close attention to when a gift paid by check is cashed. A gift made to an individual this way is deemed complete in the year it is paid, certified and accepted by the drawee’s bank, not when written, Doyle says. However, when gifting to a charitable organization, be sure to write the check by the end of this year, he adds. Even if it’s cashed within "a reasonable amount of time" after the start of 2021, it's still deductible for income tax purposes in 2020. (Photo: Shutterstock)
3. Consider gifting by credit card. “If you’re caught short” and don’t have the cash for a gift, “what you can do is just charge it on your credit card,” Doyle says. “Once it is charged on the card, you are obligated to the bank and that’s deemed to be a completed gift for charitable deduction purposes” this year, he notes. (Photo: Shutterstock)
4. Consider using cash. “If you’re going to be making annual exclusion gifts, consider using cash or high-basis assets, meaning assets with cost basis close to market value, so the [recipient] isn’t burdened with an income tax on the appreciation,” according to Terry Sylvester Charron, senior family wealth advisor at the firm. She also suggests making a gift of appreciated stock held for more than one year rather than a gift of cash, since the gain on the appreciation never gets taxed. “You should avoid making gifts of stock whose market value is less than its cost basis,” she warns. Instead, sell the stock and donate the cash proceeds, because the loss on the sale of the stock is deductible against capital gains; plus, it can offset as much as $3,000 of ordinary income with any excess and any remaining capital loss carried over indefinitely. (Photo: Shutterstock)
5. Maximize contributions to retirement plans. As is the case every year, “Maximize your contributions to your qualified retirement plans,” says Doyle. Keep in mind that individuals over 70 ½ are now allowed to contribute to an IRA if otherwise ineligible. This is because the Secure Act of 2019 eliminated the age cap on the ability to make a contribution to an IRA, he notes. (Photo: Shutterstock)


6. Consider converting a traditional IRA to a Roth IRA. This may be a good year to convert a traditional IRA to a Roth, because taxable income may be lower than usual, Doyle explains. Also, thanks to the Coronavirus Aid, Relief, and Economic Security (CARES) Act, “You can combine that with a charitable gift” made to charity in cash this year only and deduct up to 100% of your adjusted gross income, he said, noting it’s usually just up to 50%. (Photo: Shutterstock)
7. Consider withdrawing from a retirement plan this year if you're hurting from COVID-19. Investors negatively impacted by the pandemic still have time to take advantage of the CARES Act and withdraw up to $100,000 from qualified retirement plans before the end of 2020 without incurring the normal 10% early withdrawal penalty, Doyle points out. Still, he warns, it may be a “little bit of a challenge” for some investors to keep track of the distribution income tax. This can be paid over the next three years; the distribution can be returned to a qualified retirement plan within three years; and the contribution can be treated as a trustee-to-trustee rollover and not as taxable income, he added. (Photo: Shutterstock)
8. Don’t fret about the potential tax implication of Joe Biden being elected president. Don’t be too concerned about tax implications from the election of Joe Biden as president, since it seems likely the Senate will remain Republican. This makes it likely that Biden will have a hard time getting at least some of his plans passed, Doyle says. “Tax legislation is going to be a challenge” for the new president for at least the next two years, until the mid-term elections, he predicts. For the same reason, “We can hit the pause button” on any plans to drastically make changes in estate planning before the end of 2020, Doyle explains. However, keep your eye on the runoff elections in Georgia in January. If the Democrats win both, they will get a slight edge in the Senate by virtue of Vice President Kamala Harris’ possible tie-breaking vote. Also, under earlier tax law, the $11.58 million lifetime gift tax exemption will “sunset” and go back to $5 million starting in 2026, which some individuals should keep in mind, he adds. (Photo: Daniel Acker/Bloomberg)
9. Follow a tax loss harvesting rule of thumb. When it comes to tax loss harvesting, a “rule of thumb” to remember is to “sell enough losses to cover any capital gains realized in the current year plus $3,000,” according to Charron. This is because the losses “will offset gains” and up to $3,000 of ordinary income from wages. Also, $3,000 is the maximum amount of losses that can offset ordinary income in a given year, she notes. (Photo: Shutterstock)
10. Mutual fund investors can reduce capital gains. “Mutual fund investors can actually reduce their capital gains in any given tax year by simply selling the mutual fund before the record date for capital gain distributions at year-end,” Charron points out. If an investor is “contemplating buying shares in a mutual fund between now and year-end, you should avoid buying the distribution, meaning buying the shares just before the fund’s record date,” she says. This is “especially true if the fund has significant capital gains.” If that's the case, consider waiting until after the record date before buying shares in the fund. (Photo: Shutterstock)



During a recent online event, BNY Mellon tax experts highlighted multiple steps advisors and their clients should consider taking when it comes to tax issues in the remaining weeks of 2021.

Speakers included  Jeremiah Doyle, senior tax and estate planning strategist, and Terry Sylvester Charron, senior family wealth advisor.

To learn more about 10 of the top suggestions they made for advisors and their clients, please click through the (above) slideshow.

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