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2020 Year-End Planning for Individuals – Additional Tax Planning Opportunities

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By Bobby Hoffman

Here are some additional tax planning opportunities to consider before year-end 2020:

  • Consider Converting Your IRA: With the uncertainty of tax rates post-2025 under the sunset provisions of the TCJA and the uncertain legislative terrain with the new Congress, you may want to consider converting your Traditional IRA to a Roth IRA. You would owe lower taxes on the IRA amount currently, to the extent it exceeds basis, but upon retirement when tax rates are expected to be higher, all the distributions from the Roth, if the holding period is met, would be tax free.  The conversion of traditional IRA’s to Roth IRA’s is not an all or nothing proposition. Also, the maneuver is particularly attractive if you are experiencing an extraordinary low income or loss year.
  • Year End Donations: When gifting to charitable organizations consider gifting securities that have appreciated. As long as you have held the securities more than a year, you take a deduction for their market value. If you are over 70.5, consider using IRA distributions to fund your contributions directly from the IRA.
  • 3.8% Net Investment Tax: Higher-income individuals, estates and trusts and will be assessed on the smaller of net investment income (NII), which is investment income minus allocable expenses, or the amount by which an individual taxpayer’s modified adjusted gross income (MAGI) is over $200,000 ($250,000 for married couples). For estates and trusts, this tax applies to the lesser of undistributed NII or adjusted gross income (AGI) in excess of $12,500 for 2020. Estates and trusts should consider distributing NII to beneficiaries whose MAGI threshold is much higher. Individual taxpayers, and certain estates with passive rental income, whose NII exceed MAGI and AGI thresholds, should consider conversion of any triple net leases so they can actively participate in the management of their rental properties and avoid this 3.8% tax. Income from taxable IRAs, social security and alimony is not investment income, but does increase MAGI and could subject your NII to this tax. Consider investing in tax-exempt bonds or funds which are neither included in AGI nor MAGI for investment income purposes.
  • Capital Gains/Losses and Dividends: For 2020, the 0% rate is for taxable income below $80,000 for married filing jointly, below $53,600 for head of household and $40,000 for single taxpayers. The 15% rate applies to taxable incomes below $496,600-MFJ, $469,050-MFS and $441,450-single while the 20% rate applies to taxable income above those levels.

For more information regarding year-end tax planning, please contact us at 404-255-7400 or info@hoffmanestateaw.com.


  • Bobby Hoffman

    Bobby joined the Tax Department at Hoffman & Associates in early 2012 after gaining both Audit and Tax experience while working at a local CPA firm. He specializes in tax planning and compliance for individuals and small businesses.

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