As the year comes to a close, here are seven strategies to consider when thinking about your finances. Consider talking to a J.P. Morgan representative and other advisors to help you with your year-end planning.

Retirement plans/accounts and contributions

The SECURE Act extended the deadline to set up and fund most employer-sponsored qualified retirement plans to the sponsor’s tax filing deadline, including extensions (generally September 15 or October 15 of the following year, depending on the type of entity). Contributions to a traditional or Roth IRA for 2023 must be made by the due date for filing your 2023 income tax returns (not including extensions) – or April 15, 2024. Review what you have already contributed for 2023 and plan for any future retirement contributions.

Thanks to the recently passed SECURE Act 2.0, there are some additional changes to IRA contribution rules starting next year. For example, the maximum IRA catch-up contribution amount for people age 50 and older (which is currently $1,000) will be indexed for inflation.

Conversion of 529 assets to Roth IRAs in certain cases

Starting in 2024, savers who have had 529 accounts for at least 15 years may be able to roll up to a lifetime maximum of $35,000 from the 529 accounts into Roth IRA accounts – subject to annual Roth IRA contribution limits and other requirements.

Required minimum distributions

Under SECURE Act 2.0, original owners of traditional IRAs who turn 72 on or after January 1, 2023 must take their first required minimum distribution for the year they turn 73 (due by April 1 of the following year) to avoid additional taxes on the undistributed amount. After their first RMD, subsequent RMDs must be taken by December 31 to avoid additional taxes.

The rules around required distributions from inherited IRAs continue to be in flux; consult with your tax professional before making decisions about taking distributions from inherited IRAs.

Starting in 2024, employer-provided Roth accounts (such as Roth 401(k)s) will no longer require that the employee account-holder take RMDs.

Harvest investment losses to offset capital gains but beware of the wash sale rule

Using capital losses to offset gains may lower or eliminate capital gains taxes.

However, in order to deduct a loss from the sale of stock or securities in the year you make the sale, you must not trigger the wash sale rule. Among other requirements, this means that you must wait at least 30 days either before or after your sale date to repurchase a security you’ve sold for a loss or another security that is “substantially identical”. If you’re not sure whether a security is “substantially identical,” check with your accountant or other tax professional. The wash sale rule is highly complex and you should consult your tax advisor regarding it.

Note that the wash sale rule applies only to disallow certain losses: You can repurchase a winning security that you had sold at a gain shortly before or after you sold it without triggering the wash sale rule.

Make gifts before year-end

In 2023, you can make an annual gift of up to $17,000 ($34,000 for married couples) to each recipient – the annual exclusion.¹ If you don’t use your annual exclusion in a particular year, you lose it. Even if you are over the annual exclusion in a given year, you can make aggregate lifetime gifts of up to $12.92 million ($25.84 million for married couples) – the lifetime exemption applicable to 2023 – without triggering gift or estate taxes.

If you used your full lifetime exemption in 2022, you have an additional $860,000 ($1.72 million for married couples) to give away in 2023. The unified credit for gift and estate tax is currently set to revert to pre-2018 levels at the end of 2025, and it could revert sooner if Congress addresses this issue in legislation, although we believe this is unlikely in a divided Congress.

Donate to charity this year

Charitable contributions may be deductible from U.S. federal taxable income if certain requirements are met and you itemize deductions, although the deduction is limited to a percentage of your adjusted gross income. Subject to exceptions, deductions that exceed the applicable limit can generally be carried forward for five years.² The allowable deduction is generally the fair market value of the gift subject to adjustments.

If you contribute qualifying appreciated property (most frequently stocks, bonds or other securities that have grown in value), you can generally qualify for the income tax deduction described above based on the full fair-market value of the contributed property and avoid paying capital gains tax on the appreciation, which can be a tax-efficient way of managing your charitable giving.

You can also consider making a “qualified charitable distribution” of up to $100,000 from your IRA or an inherited IRA – but only if you are over age 70½. A qualified charitable distribution does not give you an income tax deduction, but the amount of the distribution also is not includible in your income for 2023 even though it counts as part of your required minimum distribution (if you’re subject to RMDs).

Consider your stock options

If you will not be subject to the Alternative Minimum Tax (AMT) in 2023, consider exercising vested in-the-money incentive stock options, as this may have little or no U.S. federal income tax consequence.

Bottom line

The end of the year can be a good time to review your financial situation and ensure that you’re on track to meet your goals. These year-end steps can be a good place to start. Speaking with a financial advisor or a tax professional can be helpful to strategize and set yourself up for success next year and beyond.

IMPORTANT INFORMATION

This material is for informational purposes only, and may inform you of certain products and services offered by J.P. Morgan’s wealth management businesses, part of JPMorgan Chase & Co. (“JPM”). Products and services described, as well as associated fees, charges and interest rates, are subject to change in accordance with the applicable account agreements and may differ among geographic locations. Not all products and services are offered at all locations. If you are a person with a disability and need additional support accessing this material, please contact your J.P. Morgan team or email us at accessibility.support@jpmorgan.com for assistance. Please read all Important Information.