Potential Financial Steps for T-Mobile Employees in November
By Kevin Estes
Oh, What a Night!
I hope you had a Happy Halloween!
As usual, ours was a magical celebration with neighbors and friends. Think: bonfire, snacks, drinks, and trick or treaters. 🔥
Potential Steps for T-Mobile Employees This Month
Financial steps T-Mobile employees might take in November include:
Schedule spring Paid Time Off (PTO)
Plan tax loss or gain harvesting, if any
Finalize year end charitable contributions
Purchase holiday gifts
Review / rebalance investment portfolio
Of course, this assumes the open enrollment elections have been finalized. If not, do that first!
1. Schedule Spring Paid Time Off (PTO)🌴
You’ve already booked all your vacation for 2024 (right, RIGHT?! 😆). Now, it’s time to consider spring.
Remember those cold and dreary days in February? It could be a good time to plan a vacation before prices rise!
The biggest benefit of scheduling Paid Time Off now is to call dibs! Many teams have limited coverage so get yours approved early.
2. Plan Tax Loss or Gain Harvesting, If Any
Income generally falls into three buckets for taxes:
Earned
Investment
Passive
Earned
Earned income is what someone receives from working. That could be working for a company, self-employment, or both!
Investment
Investment income is money earned from investments like stocks, bonds, mutual funds, etc. The U.S. government encourages capital funding by taxing investments at a lower rate than wages.
Passive
Passive income is for investments like rental real estate, limited partnerships, and equipment leases. If someone materially participates in the business, it may be taxed as earned income. Material participation is complicated and beyond the scope of this post.
Rarely Mix
The important thing is that these buckets are rarely allowed to mix.
Passive investments were once abused by higher earners who used them as tax shelters. Now, they’re tracked separately. Passive activity losses (not your PAL 😉) generally don’t reduce earned income.
The same is typically true for investments. Losses normally don’t lower earned income and, therefore, taxes.
Tax Loss Harvesting
However, there’s an exception!
Up to $3,000 in net investment losses can reduce earned income and lower taxes. The important term is net.
If someone sold investments for the year which together had $7,000 of gains, that person would need to sell other investments which realize $10,000 in losses to arrive at the $3,000 net loss.
Investment losses may lower someone’s tax bill… especially if they’re subject to a higher tax bracket.
Tax Gain Harvesting
Another opportunity is tax gain harvesting. This occurs when someone has lower income than they normally would.
Because of their deductions and lower tax bracket, it may make sense to sell investments before year end. They might pay less tax on the sale in 2024 than they would later!
Minimize Lifetime Taxes
Two ways to potentially minimize lifetime taxes are:
lower income in high-income years and
raise income in low-income years.
3. Finalize Year End Charitable Contributions
Among other things, the Tax Cuts and Jobs Act of 2017:
Capped the state and local tax (SALT) deduction at $10,000,
Lowered the deductible mortgage balance from $1,000,000 to $750,000 (existing mortgages were grandfathered), and
Nearly doubled the standard deduction.
Standard Deduction
More people now use the standard deduction.
Good news! That simplified taxes for millions of Americans.
Bad news! That caused fewer people to itemize deductions and effectively reduced the tax benefit of charitable giving.
Itemized Deduction
Nonetheless, millions of Americans still itemize. It may pay to be strategic with charitable giving.
Some techniques to save more tax with donations include to:
bunch - give more one year instead of less in multiple years,
contribute to a Donor Advised Fund - give now and then advise on how the funds will be distributed later, and
donate an appreciated asset - give an investment which has risen in value to charity.
It may not make sense to sell an investment which has risen in value, pay tax on the gain, and then donate what’s left to charity. Charities don’t pay income taxes! Donating an appreciated investment can save taxes, enable a bigger contribution, or both.
T-Mobile employees may also have access to special Giving Tuesday employer matching the Tuesday after Thanksgiving, 12/3/2024.
4. Purchase Holiday Gifts🎁
It’s nearly the most wonderful time of the year!
Buying gifts early can ensure they’re:
still available and
arrive in time.
There will be big sale days in a few weeks:
Black Friday, 11/29/2024
Small Business Saturday, 11/30/2024
Cyber Monday, 12/2/2024
The discounts don’t just have to be for gifts! There are some business items I hope to buy on sale. 🤞
5. Review / Rebalance Investment Portfolio
Finally, now may be a good time to check your portfolio.
The stock market’s done well this year! Investments may have drifted from their target allocation.
ESPP
T-Mobile employees may have recently stocked up (literally) through the Employee Stock Purchase Plan. Do they still want to hold it?
For more, check out:
Is It Worth Holding Employer Stock?
Are Employee Stock Purchase Plans Underrated?
RSU
Restricted Stock Units (RSUs) vest in February. It’s worth considering how much, if any, company stock to hold.
For more, check out:
What to Do with RSUs
How Are Restricted Stock Units Taxed?
Frequent RSU Vests May Be Win Win Win
Emergency / Opportunity Fund
As part of the review, it’s important to consider whether you have enough in an emergency and opportunity fund.
Even the wealthy can slip into a scarcity mindset if they don’t have ready access to funds.
Retirement Account Investment Changes
It may be best to make the investment changes in retirement accounts.
Doing so could avoid realizing gains in taxable brokerage accounts. Selling an investment for a taxable gain could require someone pay taxes either:
through an estimated quarterly payment or
with their tax return.
Fortunately, transactions in retirement accounts aren’t usually taxed.
Asset Location
Where assets are held is often overlooked.
Asset location may be as important as asset allocation. Are assets in the right location?
It may make sense to hold:
more aggressive investments in after-tax accounts and
more conservative investments in pre-tax or taxable accounts.
If you’re interested in a review of your specific situation…
Disclaimer
In addition to the usual disclaimers, neither this post nor this image includes any financial, tax, or legal advice.
