ChooseFI | Financial Independence Podcast15 Nov 2021

351 | Year-End Tax Planning Strategies

Congress is about to eliminate the backdoor Roth IRA — and you have until December 31st to act. Sean Mullaney returns to help you squeeze every last tax benefit out of 2021 before year-end deadlines slam shut. This year's tax landscape looks different: backdoor Roth conversions face a new deadline, modified adjusted gross income thresholds determine who qualifies for key tax credits, and early retirees have a shrinking window to optimize Roth conversions. Whether you're racing to max out 401(k) and HSA contributions, considering donor advised funds to eliminate capital gains taxes on charitable donations, or planning income levels to maximize tax credits in early retirement, this episode covers the year-end moves that matter most for financial independence. Timestamps & Key Takeaways: [00:02:05] Sean Mullaney discusses his popularity in the tax planning space. [00:02:30] Backdoor Roth IRA Expiration Discussion Important changes this year regarding the backdoor Roth IRA deadline. Complete your backdoor Roth IRA by December 31st to avoid future restrictions. [00:09:01] Understanding Modified Adjusted Gross Income (MAGI) MAGI affects eligibility for tax benefits, including Roth IRA contributions. Ensure you're aware of your MAGI and how it impacts Roth IRA eligibility. [00:11:12] Maximizing Contributions to Lower Taxable Income Contributions to 401(k)s and HSAs can lower taxable income before year-end. [00:39:30] Donor Advised Funds as a Tax Strategy Utilize donor advised funds for charitable donations to optimize tax efficiency. Contribute appreciated stocks to donor advised funds to eliminate capital gains taxes. [00:49:30] Early Retirement Tax Planning Opportunities How early retirees can optimize their tax strategies. Plan Roth conversions and consider income levels for maximizing tax credits. Key Quotes: [00:06:32] "Act now; there's no downside to completing your backdoor Roth IRA by December 31st." [00:25:49] "Ensure your retirement accounts are streamlined before proceeding with the backdoor Roth IRA." [00:42:54] "Utilize donor advised funds to permanently eliminate capital gains taxes while donating." [00:54:36] "Don't let year-end tax strategies pass you by; take action now." Action Items: Review your retirement account structure for optimal tax planning. Clean up old retirement accounts before doing a backdoor Roth IRA. Assess your investment portfolio for potential appreciated stocks to contribute to a donor advised fund. Related Resources: Sean Mullaney's article on Year-End Tax Planning ▶ Listen Next: Ep. 352 — DIY Financial Planning: Create Your Own Financial Plan | Essential Listening

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