Year End Tax Planning

November 28, 2023

As the year draws to a close, it's time to start thinking about your year-end tax planning. By taking some proactive steps now, you can potentially reduce your tax liability and improve your overall financial picture.

As your trusted tax advisors, we’re here to help explain tax and financial planning opportunities. Please contact us at your earliest convenience to discuss your situation so we can develop a customized plan.  

In the meantime, here’s a look at some issues impacting taxpayers to consider as we approach year-end.

Individuals

Charitable Contributions - If you are planning to donate to a charity, it’s likely better to make your contribution before the end of the year to potentially save on taxes. There are many tax planning strategies we can discuss with you about charitable giving. For example, consider the benefits of donating appreciated assets that have been held for more than one year, rather than cash.

Required Minimum Distributions (RMDs) - You cannot keep retirement funds in your account indefinitely. RMDs are the minimum amount you must annually withdraw from your retirement accounts once you reach a certain age (see page 21 of our Tax Planning Guide).  These withdrawals usually have tax impacts, However, there are opportunities to roll retirement funds to a qualified charity to satisfy the RMD without incurring taxes.

Capital Gain and Loss Harvesting - Consider tax benefits related to using capital losses to offset realized gains - and move any gains to the lowest tax brackets, if possible. Also, consider selling portfolio investments that are down before the end of the year. Net capital losses can offset up to $3,000 of the current year’s ordinary income. The unused excess net capital loss can be carried forward to use in subsequent years.

Digital Assets and Virtual Currency - Digital assets are defined under the U.S. income tax rules as any digital representation of value that may function as a medium of exchange, a unit of account and/or a store of value. The sale or exchange of virtual currencies, the use of such currencies to pay for goods or services or holding such currencies as an investment, generally have tax impacts –– and the IRS continues to increase its scrutiny in this area. Be prepared to give us the information needed to report on your tax return.

Estimated Tax Payments - Let’s review withholding and estimated tax payments and assess any liquidity needs.

Roth IRA Conversions - Let’s discuss and weigh the benefits of converting your traditional IRA to a Roth IRA to lock in lower tax rates on some of your pre-tax retirement accounts.

Maximize Retirement Contributions - If you need to max out your retirement contributions, now is the time. By taking advantage of tax-advantaged accounts, you can reduce your taxable income while building a substantial nest egg.

Gift/Estate Planning, including setting up or contributing to a Section 529 plan for college savings -Talk to us about the annual gifting limits, including exclusions for tuition and medical expenses paid directly to providers.

Businesses

Analysis of Your Financial Statements - Let’s look at where your business is positioned with income and expenses to close out the tax year. This may mean getting caught up on your bookkeeping to have a better picture of where your tax situation stands. We can help you analyze your financial statements for tax savings and planning opportunities.

Deferral of Income and Accelerating Expenses - Many times, there may be strategies such as deferral or acceleration of income or prepayment or deferral of expenses, that can help you save taxes and thereby strengthen your financial position. For example, in terms of property and equipment purchases, you may benefit from making these purchases before the end of the year.

Qualified Business Income Deduction - Certain professions and high-income earners may be limited to this 20% deduction on business income, so it is important that we review the income, wages paid, and other items to ensure that the maximum deduction is allowed.

Retirement Savings for Business Owners - If most of your money is tied up in your business, retirement can be a challenge. So, if you haven’t already set up a tax-advantaged retirement plan, consider doing so this year.

For more information, please review our 2023-2024 Tax Planning Guide HERE.