How to maximize year-end taxes after quitting your job or retiring early

Top advisers say that clients struggling with layoffs or retirement may have a number of tax planning opportunities as the year comes to a close.

In Q3 2020, 28.6 million baby boomers reported being out of the workforce, out of a total of 71.8 million, according to Pew Research. That’s 3.2 million more exits than in the same period in 2019.

Whether someone is leaving the workforce for good or planning to return for the right opportunity, their income and tax bracket could be significantly lower in 2022 than in 2021. influence year-end decisions.

Dale Brown, chairman of the board at Salem’s investment advisor in Winston-Salem, North Carolina, ranked second on CNBC’s 2021 FA 100 list.

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Defer income to 2022

“Whether you’re retiring or retiring, you most likely want to defer income from a higher tax year to a lower tax year,” says Brown.

Other moves could be waiting until 2022 to withdraw retirement plans, delay year-end bonuses, or postpone business earnings until January.

Accelerate deductions in 2021

If someone splits into tax deductions, Brown said, they can also explore ways to speed the write-off in 2021, with charitable gifts often providing the most flexibility.

For example, married investors can make multi-year contributions in 2021, a tactic known as “pooling,” to exceed the standard $25,100 deduction. The move includes multi-year charitable gifts with a tax break for 2021.

You really get the best of both worlds.

Steven Check

President of Check Capital Management

Donor-advised funds, a popular way to wrap gifts, allow someone to make a large up-front contribution while giving from the account over many years.

Steven Check, president of Check capital management in Costa Mesa, California, where it ranks 4th on the FA 100 list.

“You get a deduction in the year of higher income and take the time to get the money where you want it, even spread it out over a few years,” he says.

Tax consequences How to maximize year-end taxes after quitting your job or retiring early

Emma James

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