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Year-End Financial Checklist

The excitement and busyness of the holiday season is here. There are parties to attend, gifts to purchase, and good times to be had with those who are important to us. While our clients are focusing on their holiday checklists, the Charter Oak team is thinking about year-end financial checklists. To that end, below are some key things to keep in mind. 

Maximizing Retirement Contributions for 2023

There's still time to make 2023 contributions to retirement accounts. The deadline is December 31, 2023 for employer retirement plans, and April 15, 2024 for Traditional or Roth IRA accounts.

Remember IRA contributions cannot exceed earned income for the year or the IRS-imposed limits, whichever is less (see the chart below).

Take your Required Minimum Distribution (RMD)

The IRS requires you to take RMDs from certain retirement accounts, such as Traditional IRAs and qualified retirement accounts from a former employer. If you're RMD age, the Charter Oak Client Service team of Cathy, Marny, and Sue has you covered! They work with our custodians, such as Fidelity and Schwab, to ensure we have the correct RMD amount for you and that it is distributed to you in time. 

Please note there have been changes to RMDs due to the passage of the Secure Act 2.0. If you were born in 1951 or later, you do not need to withdraw any funds until April 15, after you turn 73. If you have any questions about your IRA accounts and if you may have an RMD please reach out to your Charter Oak Advisor.

Charitable Giving

Giving Tuesday, which fell on November 28 this year, has shown the incredible generosity of humanity. In 2022, nonprofits raised $3.1B on Giving Tuesday alone (Source: Giving Block). Charitable giving offers a way to financially support your favorite charities while enjoying tax benefits that accompany your generosity.

Charitable Tax Deductions

For charitable donations made by December 31, 2023 – and if you itemize your deductions because they are more than the standard deduction – then you can deduct up to 60% of your 2023 adjusted gross income (AGI) for cash gifts made to a qualifying charity (which excludes private foundations and supporting organizations). The deduction is usually limited to 30% of your AGI for non-cash contributions, such as appreciated stock gifts and donations to qualifying private foundations or organizations.

Qualified Charitable Distributions (QCDs)

If you're 70½ or older, you can take up to $100,000 annually from your Traditional IRA to donate directly to a qualified charity without paying taxes—the QCD is excluded from your taxable income. If you're age 73 and don't need to live off your RMD income, the benefit is twofold—it allows you to meet your RMD requirement and reap the tax benefits. Note: If you make a QCD, you cannot also claim a charitable deduction with those assets.

Giving to Children and Grandchildren

College savings accounts, a.k.a. 529 plans are a great way to give the gift of education while reaping tax benefits. Individuals can give up to $17,000 in 2023, per beneficiary, without the need to file a federal gift tax return (joint givers can do $34,000). Note that the gift recipient will not owe any taxes on any gift amount, and the annual gift tax exclusion will increase to $18,000 in 2024. 

Givers also have the availability to make a lump sum contribution based on five years of gifts ($17,000 x 5 = $85,000), and may be able to deduct contributions from state income tax (or get a state tax credit) depending on the state.

We hope the above provided helpful reminders. Please reach out with questions on the items above or any other financial questions as we head into the new year. It is a privilege and a pleasure to serve you and the advisors at Charter Oak wish you and yours the very best this holiday season.