J.P. Morgan’s Market Movers

Amid the uncertainty around proposed changes in tax law, here are some planning strategies you can consider as you approach your traditional year-end financial review.

Can you reduce your 2021 tax liability?

Tax-loss harvesting may reduce your tax liability. To do it, sell an investment at a loss. Then use this loss to offset either already-realized gains, or embedded gains that are realized now or in the future.1

It is always advisable to try to time your charitable donations to ensure their associated deductions are effective in the intended tax year. Consult your financial institutions to understand estimated timelines. If you’re unsure which charity you want to support, you might consider giving to a donor-advised fund (DAF).

Are you making the most of your compensation and benefits?

We recommend contributing to retirement accounts up to the full amount. For example, the maximum amounts you can contribute to retirement accounts in 2021 before year-end are $6,000 a year for IRAs, and $7,000 if you are 50 or older.

If you are an executive, you may want to exercise some of your options in 2021. The important question is: Which ones? Good candidates include those options that are deep-in-the-money, on high-dividend-paying stocks or that have a short time to expiry.

1. IRC Sec. 1222