Broker Check

Monday Money Report

| December 12, 2022

The markets were down last week, largely on fears that the Fed may have to raise rates more than the ½ a percent that was expected.  The PPI, or Producer Price Index, was higher than expected and the labor market continues to hold steady.  We still expect any recession to be relatively mild but having strong emergency savings and paying down unsecured debt like credit cards is a good idea.

We’re closing in on the end of the year, and we have a few suggestions. First, talk with your tax professional and your financial advisor about tax loss harvesting.  If you have taxable accounts that hold mutual funds, you may see large capital gains this year, even if your account is down. Tax loss harvesting is when you sell holdings at a loss and either buy a replacement or wait 31 days and repurchase them.  Those losses can help offset any gains.

While you’re talking with them, ask if a Roth conversion is appropriate. That’s when you move money from a traditional IRA to a Roth IRA, or within your 401(k) or Thrift Savings Plan. You’ll have to pay taxes on whatever you move, but with the market down, you’re moving more shares for the same amount of money. A Roth is not subject to Required Minimum Distributions in retirement, and distributions are generally tax-free.

If you own crypto currency, it’s important to know that wash-sale rules don’t apply.[1]  A wash sale is when you sell an investment at a loss and repurchase it within 31 days. The IRS won’t allow you to claim that loss. Crypto currency is not subject to wash sale rules, which means you can sell any that is down to have a loss for tax purposes and repurchase it the same day.

Other year-end moves to make include charitable contributions. I love giving appreciated stock, or investments that have gone up since you bought them, because your deduction is based on the current value of the stock, so you avoid capital gains on the donation.

If you’re 72 or older, make sure you have met your Required Minimum Distribution for all of your retirement accounts.  If you have multiple types of accounts, a 401(k) and an IRA, for example, you have to take the distributions from each type of account. You can’t leave the 401(k) alone and just take from the IRA.

A big change this year is that Venmo, PayPal, and other payment companies will need to send 1099s to you if your total transactions in the year are over $600.  This doesn’t mean you’ll need to pay taxes on all that money.  But you should expect to explain why you received the money.  If you sold a piece of furniture, the income is only taxable if it was greater than what you paid for the furniture.  Unless you’re selling items online as a business, it’s doubtful you’ll turn a profit from what is essentially an online yard sale.

Your action item this week is to stop and enjoy the season.  It’s easy to get caught up in the hustle and bustle and endless to-do lists. The frantic pace can lead to stress and overspending.  Be present in the moment and focus on what matters.  There are lots of free fun things to do this time of year. What your family will remember is the little things, like the hiking trip that went awry, or making cookies together.  An overwhelming amount of gifts can be just that, overwhelming.

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Investment advice offered through Great Valley Advisor Group, a Registered Investment Advisor. Tax advice offered through CovingtonAlsina Tax Services.

All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. 

The opinions voiced in this show are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which strategies or investment(s) may be appropriate for you, contact the appropriate qualified professional prior to making a decision.