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As we close out the year, I am prepping the financials to review with the CPA and see if we should make any last-minute moves.
The goal? Smart management to maximize gains and strategically minimize taxes. Let’s run through these real quick and make sure you check all and see what applies to you.
These can reduce your tax bill if they apply to your situation.
With crypto or stock investments, we always check our gains at the end of the year. You will pay taxes on capital gains, so the goal may be to sell the losers and reduce your gains.
If you want to buy back, wait past the 30-day wash rule for stocks. If it's crypto and not a security, you can purchase the asset immediately because the wash rule doesn’t apply.
We all need money in retirement, so you should be stuffing your accounts. Whether now or in the future, you will want to self-direct these.
You must make 401k contributions for the 2023 tax year by December 31, 2023. The annual contribution limit for 2023 is $22,500 ($30,000 if you're age 50 or older).
Contributions to traditional 401k plans are tax-deductible in the year you make them.
Consider increasing your contributions before the year ends if you have yet to reach the limit. Lower your taxable income for 2023. Allow your investments to grow tax-deferred.
Converting your traditional IRA to a Roth IRA can be advantageous. Consider this option by year-end if you've contributed to a traditional IRA. You'll owe taxes only on the earnings, not the contributions. If you want a mega backdoor, Roth, act quickly! This allows you to stuff your IRA through a 401k plan.
Look at what tax bracket you would be in and your age to determine the amount to convert. Sometimes, it pays to do this over multiple years.
If you want to contribute to your IRA, you have until the April tax deadline. If you make that contribution now, it starts earning. So the sooner, the better. With a regular IRA, you get that tax deduction.
If you have been lucky enough to inherit some IRA account from someone, you need to check if an RMD is required. If so, you want to withdraw that from the account.
With the Secure 2 Act, there were changes on RMD and therefore, check with your CPA on what to do. Also, if you have an IRA or 401k account, you will have RMDs. If you're 73 your first RMD is due April 1st the following year. If you are over 73, your RMD is due by year's end to avoid penalties.
Paying for annual plans or other business expenses now can reduce your taxable income. It's a smart move for business owners to consider.
Examples of items could include software, insurance premiums, and rent. Leases, professional fees, subscriptions, and marketing expenses are also included. If you have any outstanding payables, get them paid.
Investors can deduct the full cost of qualified equipment purchases. These purchases lower their taxable income for the year under Section 179. This can be a big advantage.
179 is especially useful for individuals planning to purchase new items, such as computers, software, machinery, or other eligible assets.
Bonus depreciation allows investors to deduct a higher percentage of qualified equipment costs. Depreciation enhances their savings potential when purchasing equipment in the current year.
In 2023, the bonus depreciation rate is a generous 80%, further amplifying the tax benefits of Section 179. By using both strategies, you can lower your tax liabilities. This will give you more resources for reinvestment and growth.
However, timing is key! Remember, the deadline to place qualified equipment in service and claim these deductions for the 2023 tax year is December 31st. Review your planned equipment purchases. Consider accelerating those that qualify for Section 179 and bonus depreciation. Take advantage of these valuable tax savings.
You can usually deduct contributions to qualified charities on your federal taxes. This means you can reduce your taxable income by the amount you donate, potentially lowering your tax liability.
Sometimes, you can deduct up to 50% of your adjusted gross income (AGI) for qualified charitable contributions. Donations can be given to public charities and charitable organizations. Some private operating foundations also accept donations.
Annual gift exemption can save on your future estate taxes at death. You can gift up to $16,000 per person without it counting against your lifetime limit. It's a great way to start passing on wealth to your heirs so you can die with zero.
Do you have kids that will go to private school or college? Make contributions to those 529 plans. Many states provide tax deductions for these contributions.
Consult with a tax professional for personalized guidance. Ensure you maximize your benefits by doing so.
Remember, the key is to grow your wealth and keep as much of it as possible. A little year-end strategizing can go a long way!
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