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Blog: The Live Greater View: Key Items for Year End Tax Planning

Blog: The Live Greater View: Key Items for Year End Tax Planning

October 25, 2023

As we start the fourth quarter and wrap up 2023; it is a good time for year-end tax planning.  Year-end tax planning is crucial for individuals and businesses to minimize their tax liability and make the most of available tax benefits.  Here are some best practices we discuss and review with clients:

Individual Clients:

1.       Review your financial situation:

  • Assess your financial situation, including income, deductions and investments.  What has changed from prior years, will you have more or less income?  Did your investment interest increase and potentially increase your liability?  Have you had a change in employment, did you move? 

2.       Review Retirement Account Contributions:

  • Are you on track to max out your 401(k) contributions?  Did you elect Traditional pre-tax contributions or ROTH after tax?  Are you eligible to contribute to an IRA or ROTH. 

3.       Capital Gains:

  • Review your investment accounts for potential Capital Gains.  Will you have gains paid by funds you own?  Did you buy or sell any funds during the year that generated a capital gain or loss?  Do you have funds that currently have an unrealized loss that you can harvest the loss and offset gains or income?

4.       Charitable contributions:

  • Have you or do you plan to make Charitable donations before the end of the year?  Are you over age 70 ½ and eligible to make Qualified Charitable Distributions from your IRA?  If you are required to take mandatory distributions from your IRA, age 73 in 2023, you can elect to pay to a charity and take an above the line deduction and reduce your taxable income
  • Make sure to keep you receipts.
  • Have you had a large income or significant event- sale of company or stock- consider a Donor Advised fund that will allow you to take a full charitable deduction in the year funded and to distribute to the charities of your choice over multiple years

5.       Review and Adjust withholdings

  • Check your withholdings on you pay stubs and/or estimated payments to ensure they align with your actual tax liability.  Make any adjustments if necessary

6.       Flexible Spending Accounts(FSA)/Health Saving Accounts(HSA)

  • Plan  to use any funds remaining in your FSA as they will not carry over to the new year
  • Did you max out your HSA contributions- this is a tax deduction to current income
  • Your HSA account can rollover to future years and used to pay for future medical expenses

7.       Required Minimum Distributions

  • If you are at the age for required minimum distributions from your qualified accounts, age 73 in 2023, such as IRAs and 401(k)s; make sure you take your distributions before year-end to avoid any penalties. 

8.       Gift tax exclusion

  • Take advantage of annual gift tax exclusion by making tax free gifts to individuals such as family and friends.  You can gift up to $17,000 per person in 2023 with out impact to your annual gifting exclusion

9.       Maximize deductions

  • Review your itemized deductions to determine if you can benefit from mortgage interest, medical expense and state and local taxes

10.   Tax credits

  • Check to see if you qualify for any tax credit such as Child and Dependent care, Lifetime learning, student loan interest deduction, adoption credit to name a few

Business Owners            

  • Make necessary year end purchases and expenses before yearend
  • If you live in a state with Pass Through Entity tax, check with your accountant to see if your business qualifies and if eligible to make a State tax payment

This is not an all-inclusive list as each taxpayers situation is unique but provides some points to consider.  The best policy is to coordinate with your Advisor and Accountant to review and discuss your personal situation. 

Disclosures: Generally, a donor advised fund is a separately identified fund or account that is maintained and operated by a section 501(c)(3) organization, which is called a sponsoring organization. Each account is composed of contributions made by individual donors. Once the donor makes the contribution, the organization has legal control over it. However, the donor, or the donor's representative, retains advisory privileges with respect to the distribution of funds and the investment of assets in the account. Donors take a tax deduction for all contributions at the time they are made, even though the money may not be dispersed to a charity until much later. For a comprehensive review of your personal situation, always consult with a tax or legal advisor. Neither Cetera Advisor Networks LLC nor any of its representatives may give legal or tax advice.