2023 Year-End Tax Strategies

It is already December, but it is not too late to share the following year-end tax strategy ideas to reduce their 2023 federal income tax liability.

• Review tax withholding and estimated payments – they don’t want to be exposed to fines for failing to withhold / pay the appropriate amount of income tax.
• Review and understand the allowable deductions and credits – which may decrease their ultimate income tax liability.
• Make those last-minute charitable gifts – remember to remind them to keep records of their gifts.
• If they know they could be recognizing for capital gains, suggest they consider harvesting tax losses to offset the gains.
• Maximize contributions to their employer-sponsored qualified plan – Have them check with their plan administrator on the deadline so they can make adjustments to their contributions.
• Suggest maximizing their deductible on traditional IRA contributions (deadline for making 2023 contributions is April 15, 2024).
• If they expect to earn more in future years than they did in 2023, have them consider converting all or a portion of their traditional IRA to a Roth IRA before year-end.
• For traditional IRA holders who were required to take a minimum distribution in 2022 (those who reached age 72 in 2022 and older), make sure they don’t forget to take their 2023 RMD before December 31^st.
  • Alternatively, have them consider a qualified charitable distribution (up to $100,000) to reduce their income tax liability. Remind them to get a receipt from the charitable organization!
  • If they reached age 72 in 2023, they do not have to take their first RMD until April 1, 2025. See SECURE 2.0 Act of 2022 and IRS Notice 2023-23.
• Note that inherited IRA beneficiaries have no RMD for 2023. See IRS Notice 2023-54, which extends the relief provided in IRS Notice 2022-53.

For questions, please reach out to any member of the Advanced Markets Department.