In 2023 the maximum contribution to 401k and 403b plans is $22,500. Catch up contributions of up to $5,500 are allowed for those who are age 50 and above. For traditional and Roth IRAs, the maximum contribution is $6,500 with catch up contributions of $1,000 allowed. The maximum contribution for SIMPLE IRAs is $15,500 with catch up contributions of $3,500.
Nobody likes losses. However, in taxable accounts, you may be able to take advantage of them through tax loss harvesting. When you sell a security that has a loss, you can use that loss to offset the gain from selling another security. Through this tax loss harvesting action, you can reduce or eliminate the tax that you would have owed on the gain. If you don't have gains to offset, you can use up to $3,000 of the loss to offset ordinary income. The amount you don't use, can be rolled forward to use in a future year.
When harvesting a tax loss, you may sell a security that you still want to hold long term. The security can be bought back 30 days after it has been sold. You may not want to be uninvested during that period in case the market moves higher. One solution is to buy another security that is similar to the one being sold that would likewise participate in any bounce. Another solution if cash were available is to double up on the security by purchasing shares and after 30 days sell the original shares with the bigger loss. Losses can be harvested in any type of investment and at any time of the year—not just year-end.
With the latest tax reform, it has become more advantageous for some people to make charitable gifts from their IRA. To do so, the person must be over age 70 1/2. Gifts of up to $100,000 per year can be made directly to the charitable organization from the IRA and excluded from ordinary income. Therefore, someone who does not itemize their deductions can take the standard deduction and make their gift without it being included in their income.
Some eigible clients may want to make both large and small gifts from their IRAs. To simplify the process, clients can have a checkbook linked to their IRA. They could write checks from this checkbook to any qualified organization whether it be annual gifts to their church, a once a year donation to a community foundation, or a gift to fulfill a pledge. For larger or ongoing gifts, clients should contact their advisor so we can make sure that cash is available in the account. If you would like to have the checkwriting option on your IRA, please contact your advisor to see if it is appropriate for you.
The annual gift tax exclusion this year and in 2022 is $16,000 per gift. That means married couples can give up to $32,000 per recipient (usually a child or grandchild).