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More Yearend Tax Tips Karen Jou, CPA-Owner
Be sure if you are getting
married or divorced –
understand that your yearend
marital status will affect your tax return
because anyone who marries or divorces
during the year is treated as having had his or
her December 31 marital status all year.
Now is a good time to evaluate whether
you should be making year-end gifts. A
year-end gift of appreciated property can
move taxable gain to family members in
lower tax bracket. Also, you can make gifts
to any number of donees before year end,
and, if your gift is no more than $15,000,
the gifts will not be taxable or count against
your unified estate and gift tax exemption.
Married folks can make joint gifts of up to
$30,000 to each donee under these rules.
You must make any gifts by Dec. 31 for the
gifts to count as being made in 2021 and that
a gift made by check generally will not count
as a 2021 gift for gift tax purposes if it is not
cashed or deposited by the donee in 2021.
Convert Ordinary Income to Qualified
You should consider shifting investments from
ones where the income is taxed at ordinary rates,
such as bonds, to stocks that pay dividends. If
the dividend income is qualifying (received from
a domestic corporation or qualified foreign
corporation and you held the stock for more than
60 days during the 121-day period beginning 60
days before the ex-dividend date), the income
will be taxed at capital gains rates. (Note that
some dividends are not qualified dividends, even
if they are reported in box 1b of Form 1099-DIV,
Dividends and Distributions; these include capital
gain distributions, dividends paid on deposits
with financial institutions, and certain other
Prepay Certain Expenses Using a Credit Card
Contributions to charity and deductible
medical expenses are deductible when charged
to the your credit card rather than when you
pay the credit card bill.
Start a Retirement Plan
If you are eligible to contribute to an IRA
or 401(k) plan or to start a Keogh plan (if
self-employed), but you do
not currently have such a
retirement savings vehicle,
you should consider setting
one up to take advantage of deductible
contributions for 2021.
Maximize Contributions to Retirement Plans
Making contributions from pretax income is
always a good strategy, but it can be especially
beneficial if it brings your income down into a
lower tax bracket.
The increased estate tax exemption
($11,700,000 for estates of decedents dying in
2021) and portability of the unused exemption
of the first spouse to die means that for many,
estate planning has become less important.
Now is a good time to revisit estate plans made
under the old rules to see if they should be
revised to reflect the new rules.
Karen Jou, CPA-Owner of HR Block
offices located at 41-18 Crescent St. and
47-46 Vernon Blvd., LIC. If you have any
questions or require additional information,
please call Karen at 718-707-0295.