Silver linings for the end of the year if you have had a bad financial 2021

I’m sorry if your year has sucked on the financial side of things. Lots of lost jobs, unemployment, reductions, etc.

But there are almost always some potential opportunities if this was the case for you.

1. Roth conversions. If you are single (married filing joint), and had no income in 2021, you can convert $12,250 ($25,100) from Traditional to Roth and pay no federal income taxes whatsoever. This is the standard deduction and the effective 0% tax bracket. If you don’t mind paying 10%+, consider converting even more.

2. Tax gain harvesting. If you have unrealized gains on securities in a taxable account, and you are single (married filing joint), you can bring your taxable income up to $40,400 ($80,800) with long-term capital gains and be taxed at the 0% rate. Even if you want to hold these investments, you can realize the gain and reacquire them to reset your cost basis, reducing future tax obligations.

3. Less helpful for fewer people, but if you’re expecting 2022 to be a better year, hold off on making your January mortgage payment until January, in order to capture taxes and insurance for a potentially itemizable deduction in 2022.

4. Also rare, but if you have an old 401k with company stock in it, you may be eligible for Net Unrealized Appreciation: the ability to take your company stock out of your 401k, and move it into a taxable account. If your stock has a lot of unrealized gains on it, then the opportunity is back to the second point: tax gain harvesting. Beware that this comes with tax penalties if you are under 59.5, but if the conditions are right, a crappy year financially could be a great year to exercise NUA.

Hope 2022 is better for you!