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FORVIS Private Client™ 2022 Year-End Planning Checklist

As the year-end approaches, consider these planning strategies for retirement, estates, income tax, investments, and charitable giving. Read on for details.
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As we approach the end of another year, below are some planning strategies to consider before year-end. Please consult with your trusted tax, estate, and financial planning professional to see how these strategies may impact your personal situation.

Retirement Planning

  • Convert a portion (or all) of a traditional IRA to a Roth IRA. Conversions generally increase taxable income in the year of the conversion; however, Roth IRA conversions can be an effective tool in tax bracket management and planning for distributions in retirement.
  • Make nonqualified IRA contributions and subsequently convert these traditional IRA contributions to a Roth IRA. Sometimes referred to as the “two-step Roth,” this strategy is still “in play” after a threat of elimination as part of proposals included in the Build Back Better Act. While limited by the annual contribution limit ($6,000 + $1,000 catch-up for those over 50) and the contributions being nondeductible, if done over a number of years, the Roth balance could grow to a sizable amount during retirement. Learn more with our FORsights™ article, “Roth IRA Strategies for High-Income Earners.”
  • Check year-to-date 2022 retirement plan contributions and make additional contributions if you have not maxed them out already.
  • Review the timing of IRA distributions both to help with tax bracket management and to ensure required minimum distributions are taken.

Charitable Giving

  • For those age 70 ½ and above, gift up to $100,000 of income otherwise taxed as ordinary income directly from an IRA to a qualified charity via a qualified charitable distribution (QCD). For this purpose, the charity must be an Internal Revenue Code Section 501(c)(3) organization; private foundations, supporting organizations, and donor-advised funds (DAFs) do not qualify.
  • Donate appreciated securities held longer than a year from nonretirement accounts instead of cash to a charity. This approach avoids any tax liability associated with the gain while providing a deduction equal to the fair market value of the security gifted limited to 30% of adjusted gross income without regard to any net operating loss carryback. Any excess is carried over for the proceeding five tax years.
  • “Bunch” multiple years of charitable contributions into a single tax year to help push total itemized deductions above the annual standard deduction amount ($25,900 for joint filers, $19,400 head of household, and $12,950 for single filers/married filing separate in 2022).
  • Pair the above “bunching” strategy with the utilization of a DAF to provide flexibility on the timing and determination of which charities to donate to while securing the charitable deduction in the current year.

Estate Planning

  • Review current estate planning documents, i.e., wills, trusts, medical directives, beneficiary designations, etc., to determine if any updates are necessary due to changes in personal situations or state/local laws.
  • Evaluate the important role trusts can play in estate, tax, and financial planning. Learn more with our FORsights article, “Trust Me: An Exploration Into Trusts.”
  • Utilize the annual gift exclusion ($16,000 per recipient in 2022).
  • Consider gifting up to the annual exclusion (or use the five-year gifting option available) to a 529 college savings plan. Certain states also offer a state tax deduction or credit on certain contributions.
  • For those not facing estate tax exposure, evaluate “upstream” gifting to parents and/or unwinding or eliminating strategies that no longer fit in the current estate planning environment.
  • For those with estate tax exposure:
    • Fully utilize the lifetime exclusion ($12.06 million in 2022 or $24.12 million for married couples) to “lock in” a historically high exemption amount ahead of the scheduled sunset under the tax legislation informally known as the Tax Cuts and Jobs Act in 2026 that will roughly cut current lifetime exemption amounts in half.
    • Explore strategies to take advantage of depressed valuations in the current market environment by implementing “estate freeze” techniques such as gifts to a grantor retained annuity trust (GRAT), a spousal lifetime access trust (SLAT), or techniques to leverage the current lifetime exemption such as installment sales to an intentionally defective grantor trust (IDGT).

Income Tax Planning

  • Accelerate deductions and defer income in 2022 to reduce taxable income.
  • Review and plan for any carryovers from prior years such as net operating loss, passive activity loss, capital loss, business credits, and charitable contribution carryovers.
  • For business owners:
    • Evaluate the new elective entity level pass-through taxes available in some states allowing a workaround to the current $10,000 limitation for state and local tax deductions at the individual/trust level.
    • Review current accounting methods.
    • Revisit the choice of entity and structure.

Investment Planning

  • Harvest any losses in nonretirement accounts to help offset realized gains while planning with the wash sale rule. Any disallowed losses that are carried forward from 2022 can help offset realized gains in future tax years.
  • Analyze specific tax lots to determine the most appropriate shares to sell this year.
  • Review year-end mutual fund capital gains distribution estimates for funds held in taxable accounts.
  • Review the location of assets between traditional IRAs, Roth IRAs, and nonretirement accounts. 

To better understand how these strategies may help your personal situation, please contact a member of the FORVIS Private Client team or submit the Contact Us form below. Services may include investment advisory services provided by FORVIS Wealth Advisors, LLC, an SEC-registered investment advisor, and/or accounting, tax, and related services provided by FORVIS, LLP.

You can also view articles from FORVIS' 2022 Tax Guide here for more information.

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