In some ways, 2022 was a better year than 2021 or 2020. The pandemic, while still not behind us, is not impacting our daily lives as much as it did, and medical advances continue to improve COVID outcomes. At the same time, our economy has shown challenging signs. Inflation is higher than it has been in decades. Interest rates have risen. The stock market has been volatile, and recession fears have led many to revisit their financial plans.

It is against this backdrop that we share our top planning tips for the remainder of the year and look forward to additional opportunities and changes in 2023.

Dates to Remember

Custodians are not reporting the same delays in processing times as we saw in 2021, but there are still deadlines for year-end giving and retirement savings that must be considered. We continue to encourage you to make plans as soon as possible. For more information on upcoming dates to remember, see below:

November 29Submit your Donor Advised Fund grant recommendations for Schwab and Fidelity by this date.
December 7The Medicare open enrollment period for 2023 ends on this date.
December 15New Donor Advised Funds should be opened by this date.
December 30Last day to make contributions to DAFs for 2022 from Schwab or Fidelity accounts
December 31This is the last day the market is open. It’s also the last day to execute any tax strategies, with two exceptions: You have until April 18, 2023, to make IRA contributions for 2022, and if you file for an extension, you have until October 17 to make 2022 SEP IRA contributions.
January 1Social Security benefits will experience an 8.7% increase in 2023. High inflation is responsible for this increase, however, and will also raise Medicare premiums, albeit at a lower rate than Social Security payments.
January 17Fourth quarter estimated tax payments are due
April 18This is the due date for tax returns or extensions and the deadline for making your IRA or SEP IRA contribution for 2022. If you file for an extension, you may make your SEP IRA contribution as late as October 17.

Current and Proposed Legislation

Both the Inflation Reduction Act passed earlier in the year and the Secure Act 2.0 (not passed yet but may be passed later this year) have implications that may impact you. The Inflation Reduction Act contains provisions to combat climate change by offering expanded tax credits that benefit buyers of electric vehicles and those who make energy-efficient improvements to their homes (think solar panels, energy-efficient windows, water heaters, and HVAC, etc). The Secure Act 2.0 would allow increased amounts of retirement savings and could also delay the initial Required Minimum Distribution age for IRAs. Changes to personal income tax brackets and estate exemption amounts appear unlikely before year-end beyond the changes possible from Secure Act 2.0.

The Inflation Reduction Act, which was recently signed into law, is intended to reduce the deficit and lower energy and healthcare costs. Specifically, it contains such measures as:

  • Extending Affordable Care Act Premium reductions
  • Allowing Medicare to negotiate lower prices on some prescription drugs beginning in 2026
  • Combating climate change by offering tax credits and/or funding for renewable energy development, electric vehicles, energy-efficient home improvements
  • Increasing the IRS enforcement budget

These measures will be paid for, in part, by a 15% minimum tax on companies reporting more than $1 billion in annual earnings. However, private equity, real estate, and hedge fund sponsors will be pleased to learn that a change in how carried interest charges are taxed was stripped out of this legislation to facilitate its passing.

The Secure Act, which became law in 2019, may soon be updated through a bill known as Secure Act 2.0. Currently, under discussion in the U.S. Senate, this proposed legislation would:

  • Increase 401(k) catch-up contributions: Currently, you’re allowed to contribute a maximum of $20,500 a year to your 401(k), plus an additional $6,500 catch-up contribution if you’re 50 years of age or older ($22,500 plus $7,500 catch-up in 2023)  Secure Act 2.0 will enable you to increase your catch-up contribution to $10,000 annually when you are between the ages of 62 and 64. These catch-up contributions, however, must be made with after-tax dollars, similar to Roth 401(k) or Roth IRA contributions. Once you retire, you will be able to make qualified withdrawals of these after-tax contributions and any returns they earn without incurring tax liability.  
  • Increase the age when you must begin taking Required Minimum Distributions (RMDs) from 401(k)s and other qualified retirement plans: The original Secure Act increased the age at which you must begin taking taxable RMDs to 72. Secure Act 2.0 would increase it even further. Stay in close touch with your advisor to learn more if this legislation is passed.
  • Enable younger employees to repay student debt to begin saving for retirement: Even with the recent student debt forgiveness plan announced by the Biden administration, many younger employees are still faced with sizable student debt and will not be able to afford to make retirement plan contributions. Under Secure Act 2.0, however, employers could match their employees’ student loan payments up to a certain percentage of their salaries. These matching funds would then be contributed to the employees’ 401(k)s or other retirement plans.

It is important to note that Secure Act 2.0 may or may not be passed, and if it is passed, some of these provisions may change or event be eliminated. At the same time, it is equally important to focus on issues that current or proposed legislation does not cover. These include:

  • The SALT (State and Local Tax) deduction limitation is still in effect and has not been raised from its current $10,000 level – not good news for taxpayers in high-tax states like California, New York, and New Jersey.
  • The annual exclusion gifting limit for 2022 remains at $16,000 or $32,000 for a married couple. This will adjust to $17,000 or $34,000 for a married couple in 2023.
  • The federal lifetime exemption for estate and gift tax is $12,060,000 or $24,120,000 for a married couple. This will adjust to $12,900,000 or $25,800,000 for a married couple. Keep in mind that previous legislation scheduled the federal lifetime exemption to return to 2017 levels in 2026. If that happens, the exemption will be approximately half of what it is today, adjusted for inflation.

Charitable Giving

Still have charitable giving to do? Those contemplating making larger gifts have a couple of options. In 2022, if you itemize, you can make cash contributions of up to 60% of adjusted gross income (AGI) and claim the deduction (this contribution limit is down from 2021). If you plan to give stock, the limit remains at 30% of AGI.

If you have low basis stocks or funds but have not decided which charities you’d like to receive the gifts, consider setting up a donor-advised fund (DAF). You get an immediate tax deduction and gain access to platforms (like Schwab Charitable or Fidelity Charitable) that allow for ease of gifting. Foundations can also help set up donor advised funds and have staff who can help you identify suitable candidates for charitable contributions that align with your causes of interest. 

If you don’t itemize deductions, you might want to ‘clump’ charitable contributions for multiple years of giving into this year. Talk to your advisor or tax preparer about the most effective way to give.

Many of our deadlines to complete gifts from your portfolio are as early as November 29th, so if you plan to give in this manner, speak to your advisor soon. Assets coming from an outside custodian (not Schwab or Fidelity) should be gifted as much as 6 weeks before the end of the year.

Required Minimum Distributions (RMDs)

After a one-year hiatus, RMDs began again in 2021 and are in full force this year. Those of you accustomed to making charitable gifts from your IRAs (also known as Qualified Charitable Distributions or QCDs) still have time. QCDs count towards satisfying your RMD requirement, lower your taxable income, and use pre-tax dollars to satisfy charitable intent. Again, custodians are warning of delays to process times in December, so if you plan to give from your IRAs, speak to your advisor soon.

Those of you who have inherited IRAs since January 1, 2020 from someone other than a spouse should already be speaking to your advisor about Required Minimum Distributions (RMDs). The rules for who does and doesn’t need to take an RMD in 2022 have recently been updated. (Those who inherited IRAs from non-spouses prior to 2020 may continue with prior distribution rules.)

Retirement Contributions

Your 2022 IRA contributions can typically wait until April 18 and SEP IRAs can wait until October 17 of next year, if filing on extension.

If you contribute to an employer plan but aren’t on track to maximize your annual contribution amount (in 2022, $20,500 under 50 years old or $27,000 over 50), consider changing your contribution rate to maximize your contribution before year-end.

Set up your 2023 deferrals to take advantage of the higher contribution limits: $22,500 plus $7,500 catch-up.

Did you have a low income year?

Consider a Roth conversion of a regular or traditional IRA. Your tax preparer or advisor can help you determine the impacts of a Roth conversion. Down markets may have reduced the value of your IRA assets, but they have also reduced the taxes due when you make your conversion. By employing this strategy, you will be able to withdraw assets at retirement with no tax consequences and avoid taking Required Minimum Distributions every year beginning at age 72 (or age 73, 74, and 75 if Secure Act 2.0 is passed).

Did you earn self-employment or consultant income?

Consider opening an individual 401(k). These plans allow their owners to save up to $61,000 in 2022, not including the over-50 catch-up of up to $6,500 ($66,000 in 2023 plus $7,500 catch-up), assuming you have the eligible net earnings.

Medical / Benefits Open Enrollment

For many companies, it is open enrollment time. Talk to your advisor if you have questions about changing your level of benefits, particularly life, disability, long term care, or health care insurance. Use up FSA benefits if they won’t roll over to next year. If you are on Medicare, open enrollment lasts until December 7. You may want to review your options, particularly if there have been major changes to prescriptions or medical care needs in the last year, to make sure you have the best cost, coverage, and quality plan in place.

As always, please call us if you have any questions about your year-end planning.

Wealthspire Advisors is the common brand and trade name used by Wealthspire Advisors LLC and Private Ocean, LLC, separate registered investment advisers and subsidiary companies of NFP Corp.
Certified Financial Planner Board of Standards, Inc. (CFP Board) owns the certification marks CFP®, Certified Financial Planner™, and CFP® (with plaque design) in the United States, which it authorizes use of by individuals who successfully complete CFP Board’s initial and ongoing certification requirements.
Steve Branton

About Steve Branton, CFP®, CPCC®

Steve is an advisor in our San Francisco, CA office.

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Zach Mangels

About M. Zach Mangels, MSFP, CFP®

Home > Team > M. Zach Mangels, MSFP, CFP® Zach is a Senior Vice President and advisor based in the San Rafael office.

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