Year-End Tax Planning - Bad Year

It's been a bad year

Tax planning in a bad year has two approaches:  First, because of the special deal on capital gains, you may want to create capital gains and keep other income low.  Or second, maybe you want to drag ordinary income into 2020, since you are in a lower tax bracket.

Capital Gains in 2020
If your other income is low enough, your long-term capital gains may be taxed at 0%.  That's no federal tax at all.  So this might be the time to sell that stock or property you've had for a long time.

Dragging Income into 2020
If you have assets in a traditional IRA, you may want to do a Roth IRA conversion no later than 12/31.  The whole transfer will be taxable (unless you made non-deductible contributions) but this might be a good year to show more income.

If you've recently sold stocks at a loss, consider using the wash sale rules to kill the losses and so increase your 2020 income.

Other Ideas for a Bad Year
The federal Savers Credit rewards low-income people who put money into a retirement plan.  If you have the cash, this could be a great idea.

If you've been collecting unemployment benefits, be sure to have your taxes calculated early to avoid last-minute surprises, since the benefits are subject to federal tax.

You may also want to look at these pages:

Year-End Tax Planning in General

Year-End Tax Planning for Businesses

Bess Kane, CPA