September 28, 2023


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7 financial planning tips to act on before the end of 2020

The window of opportunity to trim that 2020 tax bill, save for retirement and leverage strategies to secure your financial future is closing.

To help Americans make these moves before it’s too late, CPA financial planners with the American Institute of CPAs (AICPA) share the following 2020 year-end tips.

Prepay 2021 Residence Real Estate Taxes For a 2020 Discount

“In the past, prepaying real estate taxes could trigger the alternative minimum tax (AMT), but with a generous AMT exemption and a cap on deducting state and local taxes, AMT concerns are minimal.

While this benefit can be reduced by the $10,000 overall cap on state and local taxes, by prepaying real estate taxes in 2020 that are otherwise due before the end of 2021, taxpayers can get a discount on their 2020 taxes.”

Jason Uetrecht, CPA/PFS member of the AICPA Personal Financial Planning (PFP) Executive Committee


Excellent Opportunity for the Charitably Inclined

“For taxpayers thinking about making a large charitable contribution, 2020 offers an excellent opportunity to go all in. Unlike other years where charitable gifts are limited by a percentage of AGI (adjusted gross income), charitable donations made in 2020 to qualifying organizations are 100{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} deductible.

So, if you do decide to make a large donation, this offers a great opportunity to also lower your overall taxable income for the year. If you plan right—everybody wins.”

Maggie L.N. Rauh, CPA/PFS member of the AICPA Personal Financial Specialist (PFS) Credential Committee

Pay Home Business Expenses Now to Lower Taxable Income 

“If you have a home business or a side gig, take this time to look at your Profit and Loss Statement so you won’t be surprised by lower expenses and higher taxable income (and taxes) than expected come Tax Day 2021.

Now may be the right time to squeeze in any large business expenses you have been considering. By paying for qualified business expenses before the calendar flips to 2021, you will lower your overall 2020 taxable income.”

Brooke Salvini, CPA/PFS member of the AICPA PFP Executive Committee

Pandemic Loan Opportunity Coming to an End

“For those impacted by the pandemic who need liquidity, there is a special opportunity expiring at the end of the year. Distributions made prior to December 31, 2020 from qualified plans provide a once-in-a-lifetime chance to borrow up to $100,000 penalty, tax, and interest-free (you do lose the upside/downside on the investments) from your 401(k)/IRA over three years.


This potential liquidity lifeline should be used very cautiously to avoid setting back your retirement savings for years. But for small business owners affected by COVID costs/loss of revenue, it could be a valuable option.”

Mark J. Alaimo, CPA/PFS member of the AICPA PFS Credential Committee

Consider a Roth IRA Conversion

“The Roth IRA conversion remains a good planning technique for certain taxpayers. Doing so creates tax-free income during retirement and provides greater flexibility than a Traditional IRA does.

In the current environment where asset values may still be low, and with the potential that tax rates may increase in the future, the Roth IRA conversion is even more attractive between now and the end of 2020.”

Dave Cherill, CPA member of the AICPA PFP Executive Committee

Leverage Your Losses to Protect Your Income from Taxes 

“This has been a year to remember for stock portfolios. The market downturn caused by the pandemic produced losses not seen since 2008/2009. And the rebound since the low has been equally surprising.


Now is a great time to review your investment portfolio to realize any additional capital gains and losses for the year. If you find yourself with net realized capital losses for the year, it is important to know that you can only reduce your ordinary income by $3,000. The remaining capital loss would then be carried forward into the next year.

Remember to coordinate your capital gain/loss harvesting strategy with your tax planning. If you expect to be in a higher tax bracket next year, it may be better to carry the capital loss into next year to help offset capital gains in 2021 instead of incurring capital gains in 2020.”

Oscar Vives Ortiz, CPA/PFS member of the AICPA PFS Credential Committee

Gift Today to Reduce Future Estate Tax

“If you are looking for ways to gift your wealth while reducing your estate tax exposure, don’t forget that you can give up to $15,000 to as many beneficences as you would like each year without paying a gift tax or decreasing your lifetime estate tax exclusion amount.

This is a great way to gift your wealth without triggering a tax impact. Review this 2020 tax planning opportunity now because once the year ends it is lost.”

Mark J. Alaimo, CPA/PFS member of the AICPA PFS Credential Committee