Given the careful consideration to financial planning and changing tax legislation, Acumen Wealth Advisors would like to provide some general tax reminders as well as guidance regarding the reporting of strategies you may have implemented in the 2021 tax year. As a courtesy, we have tried to include information which may pertain to you. However, we are not tax professionals and encourage you to consult with one in filing your return.
Charitable Deduction – The CARES Act allowed for individuals to take up to a $300 and those filing jointly to take up to $600 above-the-line deduction for cash donations made to qualified non-profit organizations in 2021. If you are taking the standard deduction, be sure to claim this deduction if you have donated. If you are itemizing your deductions, be sure to report all charitable contributions made for the year.
HSA Deduction – We believe an HSA is one of the most tax efficient accounts available as contributions (up to the limit) are deductible on federal taxes (and some state taxes), growth is tax free, and distributions for qualified medical expenses are non-taxable. If you are a participant in a high-deductible health plan which is HSA eligible, you should be able to contribute to the plan for the 2021 tax year until April 15th. The individual limit for 2021 is $3,600 and $7,200 for family coverage. If you are age 55 or older you can contribute an additional catch-up contribution of $1,000 per year.
Capital Gains – With the increased need for active portfolio management, Acumen’s Portfolio Management Committee implemented many changes in 2021 to client portfolios. As a result, there may be additional capital gains liability for the 2021 tax year. Nonetheless, Acumen strives to minimize short-term gains and defer gains to another year when and if appropriate and in line with our investment thesis.
529 Plan Contribution – You may reside in a state and have a state-sponsored 529 plan for which contributions are deductible from state income tax, up to a limit. Tennessee is not a state for which 529 plan contributions are deductible on a state tax return. Since we are not able to track contributions for 529 plans for which we are not the investment adviser, it is up to you to report contributions yourself, to your tax preparer, or to us so we can research the deductibility of contributions for your state.
2021 RMDs – Remember you can direct some or all your RMD amount to a qualified non-profit organization for a Qualified Charitable Distribution. These funds will result in a distribution which will not count as taxable income while also fulfilling your RMD. Charles Schwab will not track the taxability of these distributions.
IRA Contributions – The deadline to contribute to a Traditional, SEP, or Roth IRA for the 2021 tax year is April 15, 2022. For Traditional and ROTH IRAs, the limit is $6,000 unless you are 50 or older which allows you to contribute $7,000. Contribution eligibility, amount, and deductibility is based upon income. Please reach out to us if you would like to make this contribution so we can assess which IRA type is appropriate to fund.
Please feel free to reach out regarding any questions you may have.
This document is provided as a courtesy for informational purposes only. The information has been obtained from sources we believe to be reliable; however, no guarantee is made or implied with respect to its accuracy, timeliness, or completeness. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation.
Acumen Wealth Advisors, LLC® is a Registered Investment Adviser. Advisory services are only offered to clients or prospective clients where Acumen Wealth Advisors, LLC® and its representatives are properly licensed or exempt from licensure. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. No advice may be rendered by Acumen Wealth Advisors, LLC® unless a client service agreement is in place.