What To Know About Year-End Tax Planning For Individuals
1. Postpone income until 2024 and accelerate expenses in 2023 to lower your 2023 tax liability. This
strategy will enable you to claim larger deductions, credit, and other tax breaks for 2023 such as child tax credits, higher education credits, and student loan deductions.
2. If you’ve had significant capital gains in 2023, consider selling stocks that have declined in value to offset these gains.
3. If you expect your adjusted gross income to be lower in 2023, this may be the year to convert the assets in your traditional IRA account to your Roth IRA account.
4. Consider the purchase of an electric vehicle in 2023. Many new electric vehicles qualify for a credit of up to $7,500, while the credit for used electric vehicles is up to $4,000.
5. You may be able to save taxes this year by utilizing a “bunching strategy” for itemized deductions, such as maximizing medical expenses and charitable gifts paid out of pocket, as well as prepaying your January 2024 property tax bill and mortgage payment.
6. If you are required to do so, take the required minimum distribution (RMD) from your IRA or 401(k) plan. These must begin by April 1 of the year following the year that you turn 72. You can then make a qualified charitable deduction (QCD) of the RMD to your favorite charity.
7. You can use your annual gift tax exclusion of up to $17,000 per person or $34,000 per person if married without any tax consequences.
8. If you can make your health savings account contributions by December 1, 2023, you can take a deduction of a full year’s worth of contributions for 2023.
9. Arrange for your employer to defer your bonus until 2024 to reduce your wage income in 2023.
10. Contribute the maximum amount to your employer’s retirement plan to reduce your taxable wages. These limits are: (1) 401(K): $22,500 plus $7,500 if 50 or older, (2) SIMPLE: $15,500 plus $3,500 if 50 or older, and (3) IRA: $6,500 plus $1,000 if 50 or older.
To learn more about 2023 tax planning ideas for individuals, call our office today at (727) 391-7373.