Wealth Planning

Your key deadlines in the countdown to year-end

There’s much you can do before the year ends—and then immediately after January 1—to enhance your personal finances. But timing is sometimes everything.

So here are some hard and soft deadlines to consider and discuss with your J.P. Morgan representative.

If your answer is “yes” to any of these questions, click to find out what you can do next. 

Are you 71 years old—or older?

Take RMD—by December 31
Consider donating a portion to charity

You likely need to take a required minimum distribution (RMD) from retirement accounts.

Do so before December 31. Failing to do so can result in stiff penalties: 50% on any amount that should have been, but was not, distributed.

You may have some flexibility about which IRAs to take your RMD from, so be thoughtful in that decision-making process.

To help you redeploy this cash so that it works to support your life goals, speak with your J.P. Morgan Advisor and see The bucket list: How to organize your money with intent.

Want to donate to charity?

Keep in mind: You can give up to $100,000 a year of your RMD directly from a traditional IRA to an eligible public charity. Using this qualified charitable distribution (QCD) means:

  • The amount you donate would count toward your RMD.
  • Using your RMD as a charitable contribution will exclude that amount from your adjusted gross income (AGI), which should lower your income taxes for the year.

To make sure your tax planning strategies comply with all the rules involved, speak with your tax advisors.

Did you reach the age of 70½ in 2019?

Start taking your RMD—by April 1, 2020

You likely need to start taking a required minimum distribution (RMD) from your retirement accounts every year.

Take your 2019 RMD by April 1, 2020—or face stiff penalties: 50% on any amount that should have been, but was not, distributed.

Also be sure to redeploy this cash and your tax planning strategies so that they work to support your life goals. Speak with your J.P. Morgan Advisor and see The bucket list: How to organize your money with intent.

Can you contribute to a retirement account?

Save, tax-free

It is wise to contribute up to the full amount you can:

  • IRAs—The contribution limit is $6K a year. However, if you are 50 or older, it’s $7K. Deadline for 2019 contributions is April 15, 2020.
  • 401(k) account—People under 50 years old can contribute up to $19K a year. If you’re 50 or older, you can contribute to your 401(k) an additional $6K—for a total of $25K annually. Deadline for 2019 contributions depends on your plan, but can be as early as December 31, so check with your plan administrator.
Are you harvesting tax losses?

“Double up”—by Nov. 29
And sell “doubled up” securities—by December 31

Also known as “tax-loss selling,” this is a classic tax optimization strategy that some investors are able to use to reduce their tax liabilities.

To do it, you sell an investment that you hold as a loss and use this loss to offset already-realized gains or as-yet-unrealized gains that you plan to realize this year.

If you still like the asset, you can buy it back. But be careful not to violate what’s known as the “wash sale rule.” This rule prevents you from currently taking a tax deduction for a loss if you buy a security that is substantially identical within 30 calendar days of the day you sold the first security.

If you do not want to be out of the position for an entire month, you can “double up” on your position, then wait 30 days before selling the original loss position. The last day to double up and still be able to recognize the loss in 2019 is November 29.

Be sure to consult your tax advisors about this and all tax planning strategies.

Do you have Incentive Stock Options?

Identify which you may want to exercise—by December 31 and after January 1

Speak with your tax advisor to understand how many Incentive Stock Options (if any) you can exercise without paying the alternative minimum tax this year.

Speak with your J.P. Morgan Advisor to identify which tranches you may want to exercise immediately after January 1, so that you may hold the shares for a full year before taxes are due on them the following April.

Do you want to make tax-free gifts to family and close ones?

Use your annual gift tax exclusion—by December 31

Every year, most U.S. taxpayers have the opportunity to give, tax-free, up to a certain amount, to as many people as they like, without counting against your lifetime exemption. Recipients can use the money for any purpose.

In 2019, the so-called “annual gift tax exclusion” amount every individual may give is $15K per recipient; for married couples, it’s $30K per recipient.

Consult your tax advisor and your J.P. Morgan advisor to ensure your year-end tax strategies comply with all rules and work to support your life goals.

Do you want to contribute to a child’s 529 account?

Consider “bunching”—by December 31

You can give five years’ worth of your annual gift tax exclusion amount in one recipient’s account. That means, instead of giving just $15K in one 529 account this year, you could put a total of $75K into that account, giving the funds more time to grow tax-free. Of course, doing so would mean you could not make annual exclusion gifts up to $15K to that person for the next four years.

Consult your tax advisor and J.P. Morgan representative about whether this and other tax planning strategies suit you.

Do you want to give to charity?

Consider giving to a donor-advised fund—by December 31
And make sure to time your gifts well

Make year-end donations that both maximize your tax benefit and are consistent with your philanthropic goals.

Donating to a donor-advised fund (DAF) offers more generous tax benefits (as long as you itemize your deductions).

If you are uncertain about which charities you want to benefit, DAFs may be a good choice, because they also allow you to defer a recommendation about the ultimate charitable recipient until you’re ready.

Be careful:

  • Donating appreciated stock to charity and want the donation to be deductible based on the stock’s value at the time of the donation? Make sure you have held the stock for more than a year.
  • Some assets are more difficult to transfer than others. If you are looking to donate an interest in a mutual fund or in a private company, for example, be sure to:
    1. Check that the administrator of the DAF will accept it.
    2. Allow for enough time for the transfer to be effective in 2019.

Time your gifts well

1 Sources: Treasury regulations and revenue rulings as of 2017.
2 Depends on local law; check with your tax advisor.
3 While these are common outcomes, they may not apply in all situations. Please consult your tax advisor with your fact pattern to see when your gift would be effective.
4 Source: J.P. Morgan Private Bank Client Service Team as of 2017.
Do you want to transfer significant wealth to family and close ones tax-free?

Use your U.S. lifetime gift tax exemption amount—this year by December 31 and again after January 1

You can give tax-free up to the full lifetime exclusion amount in effect this year and then—after the U.S. lifetime gift and estate tax exclusion amount has been adjusted annually for inflation—give more in 2020.

In 2018, the U.S. lifetime gift and estate tax exclusion amount was $11.18 million.

In 2019, it went up to $11.4 million.

The lifetime gift tax exclusion amount for 2020 is projected to be $11.58 million.

Thoughtful estate planning and tax optimization strategies should be formulated in consultation with your estate planning attorney, tax advisor and J.P. Morgan representative.

Do you have a private foundation?

Make sure it completes all applicable annual 5% payouts

Foundations generally have the current year and the next to make distributions to satisfy the current year’s 5% payout requirement.

Your foundation’s managers should be very clear about how much of the distributions they are making this year will satisfy 2018 obligations and how much are being applied to satisfy 2019 requirements.

Executives & Business Owners
Does your employer allow you to defer compensation?

Make your annual election—by December 31

You must elect to defer your 2020 salary and bonuses by December 31, 2019.

Be sure to check your employer’s specific policy, as many employers set an earlier deadline for making the election.

Are you self-employed or the owner of a closely held business?

Consider setting up a qualified plan—by December 31

A qualified plan may provide you (and perhaps your employees) with retirement benefits and tax-deferral opportunities.

To be effective for 2019, qualified plans must be established by year-end. Note, though, they do not need to be funded until the due date for your tax filings (plus extensions).





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