An abundance of financial and tax planning strategies exist for 2023, despite a year that many characterized as uncertain due to inflation, higher interest rates, increasing geopolitical risk and the threat of economic recession. Despite many sectors calling for significant tax law changes, the divided federal government and the coming presidential election year make such changes less likely. These factors make traditional year-end financial and tax planning strategies all the more important for 2023.
Year-end financial and tax planning strategies for 2023 include:
- Projecting the amount of tax due for 2023 and estimating 2024 income
- Funding retirement plans
- Making charitable contributions
- Making annual exclusion gifts
- Funding a health savings account
- Recognizing capital losses to offset capital gains (tax loss harvesting)
- Evaluating your portfolio
- Considering deduction planning for closely-held businesses operated as pass-through entities
- Determining the impact of the excess business loss limitation
- Withdrawing a Required Minimum Distribution (RMD)
- Checking your access to cash
- Evaluating your insurance policies
- Assessing the interest rates on your debt
- Considering Roth IRA conversions
- Creating an online account with the Internal Revenue Service (IRS)
Project Amount of Tax Due for 2023
While there is still time remaining in 2023, now is a great time to project your 2023 income tax liability and determine if your withholding and/or estimated tax payments are sufficient to cover that tax liability. Making changes to your fourth quarter estimated tax payment (due January 16, 2024) could help you prevent or mitigate penalties and a large balance due on April 15, 2024. The penalty rate for underpayment of estimated tax is now eight percent of the underpaid amount, which can result in substantial penalties.
