Hey FAANG FIRE!
Earlier this week I went live with
to talk about end of year planning! I apologize for the video stuttering. No clue what I broke this time. The audio is still solid, you can catch the episode on Apple Podcasts and Spotify. More of a reader? I have the breakdown along with relevant FAANGFIRE articles linked for each topic.Episode Summary
Brent walked through his three pillars of year end planning: tax loss harvesting, income planning, and giving. The usual suspects. Then we added the tech worker version, which is basically the same game but with a few gotchas to be aware of.
Tax Loss Harvesting and Wash Sales
Most people think loss harvesting is a December thing. It is not. If you are sitting on losing lots, either from RSUs or regular index fund buys, this is a great time to clean those up.
The headache comes from wash sales. And this is where tech workers can run into issues since vesting counts as a purchase.
Quarterly vesting gives you room to harvest losses if you also sell the new vest.
Monthly vesting traps you in a permanent wash sale loop. Uber and Google folks know exactly what I mean.
Relevant FAANG FIRE Articles:
Safe Harbor and Under Withholding
The classic April surprise comes from RSUs being withheld at 22 percent. If you are in the 24 percent bracket or higher, you are under withheld from day one.
Now is the time to run your actual numbers. Add up your pay stub, RSU income, dividends, interest, and any side income so you are not guessing.
Safe harbor often protects you from penalties, but the surprise still sucks.
Relevant FAANG FIRE Articles:
Backdoor Roth Refresher
If you are over the Roth income limits, the backdoor Roth IRA is still one of the strongest levers we have to get an additional $7,000 into a Roth IRA.
One rule matters more than anything: do not end the year with money in a traditional or rollover IRA. That triggers the prorata rule and wrecks the whole strategy. Roll old IRAs into your 401k first, then do the backdoor.
Relevant FAANG FIRE Articles:
Mega Backdoor and Job Switching
The overall seventy thousand dollar 401k limit is per plan, not per person.
So if you switch jobs midyear, you may be able to double dip on after tax contributions and employer match.
Relevant FAANG FIRE Articles:
Charitable Giving and Donating Shares
If you have appreciated stock you want to unload, donating shares in kind is one of the most tax efficient moves available. Even if you do not itemize.
The annoying part is that donating shares often feels like traveling back in time. Some brokers let you do it online. Others make you print forms or fax things. Yes, fax.
If you want the deduction now but are undecided on the charity, a donor advised fund gives you breathing room. Fidelity and Daffy are good low fee donor advised funds.
Relevant FAANG FIRE Articles:
I don’t have on yet!
Other Year End Checks
Confirm your FSA and dependent care balances.
Look at last year’s capital gains and loss carryforwards.
Remember that California and New Jersey tax HSA gains.
If you want tax help next year, call CPAs now. The good ones close their doors by January.
And yes, this is also when everyone orders their annual VSP sunglasses.
That is the rundown from this week’s episode. Hope it helps you get your own year end dialed in.
-Andre
