Broker Check

2023 End-of-Year Planning Opportunities

| November 21, 2023

As we approach the end of another year, we thought it would be helpful to provide a list of opportunities to hopefully help you end 2023 on a financial high note.

  • Tax Loss Harvesting: For those with taxable investments that have an unrealized capital loss, one option is to sell the position to recognize the loss and help offset capital gains and potentially income. One key to harvesting losses is that you may want to consider taking the proceeds of the sale and investing in a similar strategy so as not to lose exposure to the asset class. You’ll want to stay out of the sold position for at least 30-days, otherwise the IRS will disallow the loss for tax purposes. Your tax professional can help you with this decision.
  • Tax Gain Harvesting: This is similar to the point above, but more for those who anticipate a significant increase in their tax bracket (and therefore their capital gains rates) in the next year or beyond. You may want to harvest some capital gains in your taxable investment accounts, pay taxes at a lower rate, and reinvest the proceeds into a similar strategy. Again, it’s recommended that you discuss this with your tax professional first.
  • Check Out Employer Benefits: This is the time of the year for open enrollment where you can review your benefits and determine if you’d like to make changes to coverage or contribution amounts.
    • If covered by health insurance, consider whether a Health Savings Account would be an attractive option based on the health of your family and cash flow.
    • If you have the option for a Flexible Spending Account, consider maximizing those contributions, and make a plan for utilizing those dollars to cover approved expenses.
    • Confirm the amount of any employer match in a retirement plan, so that you at least contribute enough to get this benefit.
    • Do you have a deferred compensation option? Utilizing this is worth discussing with your tax professional.
  • Charitable Gifts: For those who are charitably inclined, 12/31/2023 is the deadline for deductible charitable gifts to be made, but you’ll likely want to complete gifts by 12/15 to avoid any hiccups. Given the high levels of standard deductions, the tax benefit of this may be lost for some. If this is the case for you, consider doubling up charitable gifts in one year and not giving any in the next in order to maximize the tax benefit. For example, a couple plans to give away $20,000 to their favorite 501(c)3 charity on an annual basis, but their standard deduction is $27,700 for 2023. The value of their gift and other possible deductions would have to be greater than the standard deduction for them to realize any additional tax benefits. Instead, if they were to double their charitable giving in 2023 to $40,000, they would be able to itemize their deductions. They would then hold off on giving in 2023, and still have a hefty standard deduction to use.
  • Make Gifts to Family: If you are in a situation where you could be subject to estate taxes in the future, while there are trusts and other attorney-led techniques to consider, one simple way to reduce a future estate is to make gifts to loved ones during your lifetime. If this is something you are considering, it is usually recommended to stay below the annual gift tax exclusion amount to avoid any additional IRS filing. This amount for 2023 is $17,000 per donor, per recipient. This means that a married couple with two children could give up to $34,000 to each child each year without additional paperwork.

Even in a year of ups and downs, it’s important to be aware of opportunities available to you. Please don’t hesitate to reach out to us with any questions.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.