Year-End Tax Planning Starts Now: 8 Things To Do Now to Lower Your 2023 Taxes – Part 2

Last week, we explored four methods to reduce your 2023 tax burden, ranging from tweaking your withholding to smart medical planning. In this week’s blog, we’ll cover four additional ways you can employ to minimize your tax bill in April 2024.

If you missed part 1 of this series, be sure to read it here , so you don’t miss out on these money-saving techniques.?

Make Charitable Gifts

Supporting causes you care about and giving back to your community is not only fulfilling but can also offer tax benefits, especially if your family’s deductions are approaching the standard deduction threshold.

For 2023, the standard deduction is $12,950 for individuals and $25,900 for married couples filing jointly. Remember, your total itemized deductions, including charitable contributions, must surpass the standard deduction for your filing status to yield a tax advantage.

If you’re nearing this threshold, consider contributing to a meaningful charitable organization this year. This not only aids a worthy cause but also allows for extra deductions, reducing your taxable income for the year.

Keep thorough records of your charitable donations, including receipts and acknowledgments from the charities. If you donate non-cash items, note their fair market value.

If you’re uncertain about documenting your donations or unsure about the tax benefits, consult with your tax professional.

Consider Tax-Loss Harvesting

Tax-loss harvesting is a method to balance out gains by selling investments that aren’t performing well. This can help reduce the taxes you owe on your investment profits.

First, identify the investments in your portfolio that have experienced losses, and then sell them to realize these losses. Remember, you haven’t actually gained or lost anything until the money is in or out of your portfolio.

By selling underperforming investments, you can use the lost capital to offset any gains from other successful investments. Losses can offset up to $1,500 for individuals filing separately or up to $3,000 for couples filing jointly.

Keep in mind, there are specific rules and limits for tax-loss harvesting. It’s wise to consult a financial advisor or tax professional to make sure you employ this strategy correctly and in line with your overall financial objectives.

Pay Your January Mortgage Payment in December

If you own a home with a mortgage, paying your January mortgage in December can be a smart tax move. You can deduct mortgage interest on your tax return, and by paying early, you get an extra month of interest to claim on your 2023 taxes.

But, before you go ahead, double-check with your mortgage lender. Make sure they apply the payment the right way. Some lenders might put extra payments toward your principal instead of using them as interest for the next month.

Max Out Your IRA (Individual Retirement Account) or Roth IRA

Planning for retirement is vital for your long-term financial stability, and IRAs are great tools for building your nest egg. In the 2023 tax year, you can contribute a maximum of $6,500 to both traditional and Roth IRAs, with an additional $1,000 allowed for those 50 or older. It’s important to grasp the distinctions between these two types of IRAs to pick the one that aligns best with your goals.

With a traditional IRA, your contributions may be tax-deductible, potentially lowering your taxable income for the year. However, when you make withdrawals in retirement, they’re subject to taxation.

On the other hand, Roth IRA contributions are made with after-tax dollars, so they don’t grant an immediate tax deduction. Nevertheless, qualified withdrawals during retirement are entirely tax-free.

By maximizing your contributions to your chosen IRA, you can set yourself up for a more comfortable retirement while potentially reducing your tax burden for the current year.

The Foundation of Life-Long Support and Security

Taking proactive steps in year-end tax planning can significantly impact your financial well-being. By employing these eight tax-saving strategies, you can potentially increase your savings and move towards a more secure financial future.

However, effective money management is just one aspect of crafting a life you cherish and a legacy that will guide and support your family for generations.

Ensuring that you make sound strategic decisions to safeguard your family’s health, finances, and overall happiness is equally, if not more, crucial. If you want to ensure that both your financial and personal affairs are well-organized today and positioned to provide the best support for your family in the future, feel free to get in touch.

We would be honored to assist you in safeguarding everything you own and everyone you care for through our heartfelt estate planning services.

At Cheever Law, APC, we don’t just draft documents; we ensure you make informed and empowered decisions about life and death for yourself and the people you love, starting with a valuable and educational Family Wealth Planning Session. The Life & Legacy Planning Session will allow you to get more financially organized and make the best choices for the people you love. If you have already completed your estate plan, we will review that plan at your Life & Legacy Planning Session (aka Family Wealth Planning Session) to ensure that it will work the way you intend and address any holes or gaps that may be present if circumstances have changed since you executed your plan. ??

To learn more about our one-of-a-kind systems and services,?contact us ?or?schedule a 15-minute introductory call ?today.