A New Look to Year-End Tax Planning in 2020

Google+ Pinterest LinkedIn Tumblr +

Provided by Whitlock Wealth Management

At this time of year, you often hear advice to take steps before year-end to limit your tax liability. Yet 2020 is a unique year in a variety of ways – while many of the normal rules regarding managing income and timing deductions still apply, new provisions for 2020 have been implemented by The Coronavirus Aid, Relief and Economic Security (CARES) Act that may impact your year-end tax planning. Consider if any of these actions make sense for you.

Reconsider required distributions

Required Minimum Distributions (RMDs) from workplace retirement plans or IRAs are optional due to The CARES Act in 2020. If you haven’t yet taken your RMD for this year, you can let your money continue to grow. If you have taken your RMD, there is a 60-day window where you can redeposit those funds in your IRA and eliminate the claim to an RMD. As another option, if you have earned income from work you may want to take all or part of your RMD for this year and invest some or all of the proceeds in a Roth IRA. This allows you to build up your Roth savings, which ultimately can qualify for tax-free distributions later in retirement and aren’t subject to RMD rules.

Capitalize on deductions

The standard deduction for 2020 is $12,400 for a single person and $24,800 for married couples filing a joint return. At that level, most people claim a standard deduction rather than itemizing deductions. In 2020, you can claim an additional $300 for cash contributions to qualified charities. Be sure to take advantage of that opportunity before the end of the year. This is a one-time deduction for those who don’t itemize.

Take early withdrawals if needed        

If your financial circumstances have been directly affected by COVID-19 (such as a job loss), or you or others in your household have been diagnosed with the virus, you can tap your retirement savings. If you have not yet reached age 59-1/2, you can do so without penalty if you qualify, but the early distribution must occur before the end of the year. The tax burden associated with these early distributions can be spread out over three years.

Harvest investment gains or losses

Given the market’s volatility this year, you may want to consider “harvesting” capital losses. This is accomplished by selling investments in a loss position and using those losses to offset gains you realized when selling other investments. Capital losses can also be used to reduce up to $3,000 of earned income in a given year.

Be prepared for changes

With an election upon us, there could be changes in tax laws that might impact everything from tax brackets to estate tax laws starting next year. This may be an additional consideration as you make your year-end plans. Be sure to consult with your financial advisor and tax advisor before finalizing your decisions.


Bennett C. Whitlock III, CRPC®, is a Private Wealth Advisor and CEO with Whitlock Wealth Management, a private wealth advisory practice with Ameriprise Financial Services, LLC.  He specializes in fee-based financial planning and asset management strategies and has been in practice for 26 years.  To contact him visit whitlockwealth.com, call 877-WHITLOCK or email bennett.c.whitlock@ampf.com.  Offices are located at 12848 Harbor Dr, Ste 101, Lake Ridge, VA 22192 and in Downtown Historic Manassas at 9073 Center Street, Manassas VA 20110.

Ameriprise Financial, Inc. and its affiliates do not offer tax or legal advice. Consumers should consult with their tax advisor or attorney regarding their specific situation.

Investment advisory products and services are made available through Ameriprise Financial Services, LLC., a registered investment adviser.  


Ameriprise Financial Services, LLC. Member FINRA and SIPC.


Comments are closed.