As the end of the year approaches, it’s important to review your tax planning strategy. Here’s a concise checklist of actions you can take before the end of the year.
1. gift: Take advantage of annual exclusion gifts: Consider making year-end annual exclusion gifts of $17,000 for an individual or $34,000 for a couple. [i] [ii]
2. Make the most of your IRA contributions: Make sure to maximize your year-end contributions to your Individual Retirement Account (IRA). The IRS has an extensive list of requirements and restrictions. If you have a financial advisor, consult with your retirement specialist before making any major decisions. [iii] A common goal is to maximize contributions to retirement accounts such as 401(k), 403(b), TSP, or IRA to reduce taxable income and save money for retirement.
3. Establish or Fund a 529 Plan Account : Create a 529 plan account for your children or grandchildren before the end of the year. You may also consider the option of front-loading five years’ worth of annual excluded gifts into these accounts, taking into account other gifts made to these beneficiaries during the year. [iv] Please note that some states require you to use a PREFERRED 529 provider to obtain the state earned income tax credit, if one exists.
Four. Donation of tuition fees or medical supplies : Direct Payment of Tuition and Medical Fees: If applicable, consider paying tuition and non-refundable medical fees directly to your institution or health care provider. [v] If you have a child or young person you want to support and inspire, you can support them ‘tax-free’ by donating directly to educational skills and qualification providers. It could be a certification course in project management, such as the MPM Master Project Manager ® program, or a finance course and certification, such as the Chartered Financial Manager ®, and education and qualifications are tax-free gifts when paid directly to the provider. It becomes.
Five. Find out about charitable giving: Consider making charitable contributions before the end of the year, including considering the option of a charitable IRA rollover. This allows you to donate up to $100,000 to eligible charities while potentially providing a tax benefit on your 2023 income tax return. [vi]
6. Advance payment of expenses: If you want to reduce your tax burden in 2023, you can prepay your expenses before the new year to lower your taxable income. Many companies we already do business with will email invoices before the end of the year for review.
7. inheritance tax: This year, you can donate more than $12 million during your lifetime or at your death. Some people are gifting cash, assets, stocks and shares to their children and grandchildren now, as inheritance tax caps are lowered at the end of next year. Family planning: In addition, the lifetime estate tax exemption amount will be $13.6 million, up from $12.9 million.
8. Estate Planning Alerts: Wealthy taxpayers are encouraged to take advantage of these increased caps, as the Trump administration-era tax cut that doubled the federal estate tax exemption expires in 2025, effectively cutting the exemption in half. It will be done. Note: Effective January 1, 2011, the estate of a decedent with a surviving spouse may elect to transfer the decedent’s unused exemptions to the surviving spouse. This election is made based on the timely filed estate tax return of the decedent with a surviving spouse.
9. Take advantage of capital losses: By selling your investments at a loss, you offset your capital gains and effectively reduce your overall tax liability.
Ten. Take advantage of available tax credits. Reduce your tax bill by making the most of available tax credits, such as the child tax credit and education credit.
11. Income deferral: If possible, delay receipt of income until the next tax year to defer related tax liability.
12. Health Savings Account (HSA): If you have a high-deductible health plan, contribute to an HSA. This is because contributions are tax-deductible and withdrawals for qualified medical expenses remain tax-free.
13. Enhancing energy-efficient homes: Tax credits are available for certain energy-efficient home improvements, such as solar panels and energy-efficient windows.
14. Small business tax credit: Small business owners should consider available deductions before the end of the year, including the purchase of commercial equipment and eligible business expenses. You may still be entitled to a huge vehicle bonus depreciation or deduction of £6,000. [vii] [viii]
15. Collecting contributions to retirement accounts: Mentz advises high-income individuals to consider making pre-tax catch-up contributions in 2023 while they have the chance, as they will receive larger tax benefits. As an example, assume that while the employee is in her 35% tax bracket, he contributes $6,000 in catch-up contributions. He explained that if he were to withdraw this $6,000 at retirement in the 15% tax bracket, he would have effectively saved $1,200 in taxes.
16. Bonus ideas: Your child may receive a tax refund based on contributions to a self-directed qualified retirement account, so make sure your child has sufficient funds to contribute to the retirement account. If your child has qualifying income and funds a retirement account, the government will typically reduce your tax burden. This is known as the “Men’s Funding Strategy.”
Taking these steps will help you effectively manage your finances and wealth for the coming year.
**Please consult a certified professional before making any important financial, tax, estate planning, retirement, or major financial planning or wealth management decisions. It may also be important to consult a CWM Chartered Wealth Manager®, MFP Master Financial Planner, or Certified Accredited Financial Analyst®.
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commissioner George Mentz JD MBA CILS CWM® is an international lawyer, speaker, educator, tax economist, and CEO of the GAFM Global Academy of Finance & Management®. GAFM is his ESQ-accredited graduate institution that trains and certifies professionals in over 150 countries based on CHEA ACBSP and ISO 21001 standards. Mentz is also an award-winning author and a graduate law professor who teaches wealth management at one of the nation’s top law schools.
[i] Latest News – Inheritance and Gift Taxes | Internal Revenue Service (irs.gov)
[ii] Gift Tax: How It Works, Who Pays, and Tax Rates – NerdWallet
[iii] Retirement Topics – Contributions | Internal Revenue Service (irs.gov)
[iv] IRS 529 Planning Rules fs-09-12.pdf (irs.gov)
[v] Gift Tax Frequently Asked Questions | Internal Revenue Service (irs.gov)
[vi] Qualified Charitable Distributions allow eligible IRA owners to receive up to $100,000 of tax-free gifts to charity. Internal Revenue Service (irs.gov)
[vii] 2023 List of Vehicles Over 6,000 Pounds Eligible for IRS Section 179 Tax Advantage Credit | Tax File
[viii] Business Use of a Vehicle – TurboTax Tax Tips and Videos (intuit.com)
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