Now is the time to make any changes to your personal finance strategy to maximize your refund or minimize the taxes you owe for this year.
Here’s our Year-End Tax Checklist to get you started:
1. Defer your income.
If you think you will be in the same or a lower tax bracket next year, deferring your income can be a great strategy. You can work with your company to defer a year-end bonus to the following year, or if you’re self-employed, you can defer billings until the end of the year so receivables are in after the new year.
2. Take any last-minute tax deductions.
Additional deductions are a great way to lower your tax bill including charitable contributions and early payments on estimated state income tax bills, property tax bills due early in the following year, or medical bills.
3. Sell poor investments to offset any gains.
“Loss harvesting” or selling investments to realize losses is a key year-end strategy. These losses can then be used to offset any taxable gains you have realized during the year dollar-for-dollar.
4. Maximize your retirement contributions for the year.
Increase your retirement contributions to put in the maximum amount of money allowed into tax-deferred retirement accounts. The 2023 limit is $22,500, with a special allowance for an additional $6,500 catch-up contribution for employees age 50+.
5. Decide whether to itemize your deductions or take the standard deduction.
Add up your potential itemized deductions before the end of the year. If your itemized deductions exceed the standard deductions for your tax status, you should itemize your deductions when filing.
6. Watch your flexible spending accounts.
Tax-free contributions to these accounts are great but don’t forget to use any remaining funds before the end of the year so you don’t lose them. You can also check to see if your employer decides to participate in a grace period, giving you extra time to spend any FSA funds.
7. Account for any energy efficient improvements made to your home.
The Energy Efficient Home Improvement Credit allows homeowners to credit 30% of expenses for energy efficient improvements such as new windows, doors, HVAC, etc. up to $1,200 with a separate limit of $2,00 for heat pumps, biomass stoves, and boilers.
8. Consider purchasing an electric vehicle.
The purchase of a new, qualified plug-in EV or fuel cell electric vehicle qualifies you for a non-refundable credit up to $7,500.
Here’s our Year-End Tax Checklist to get you started:
1. Defer your income.
If you think you will be in the same or a lower tax bracket next year, deferring your income can be a great strategy. You can work with your company to defer a year-end bonus to the following year, or if you’re self-employed, you can defer billings until the end of the year so receivables are in after the new year.
2. Take any last-minute tax deductions.
Additional deductions are a great way to lower your tax bill including charitable contributions and early payments on estimated state income tax bills, property tax bills due early in the following year, or medical bills.
3. Sell poor investments to offset any gains.
“Loss harvesting” or selling investments to realize losses is a key year-end strategy. These losses can then be used to offset any taxable gains you have realized during the year dollar-for-dollar.
4. Maximize your retirement contributions for the year.
Increase your retirement contributions to put in the maximum amount of money allowed into tax-deferred retirement accounts. The 2023 limit is $22,500, with a special allowance for an additional $6,500 catch-up contribution for employees age 50+.
5. Decide whether to itemize your deductions or take the standard deduction.
Add up your potential itemized deductions before the end of the year. If your itemized deductions exceed the standard deductions for your tax status, you should itemize your deductions when filing.
6. Watch your flexible spending accounts.
Tax-free contributions to these accounts are great but don’t forget to use any remaining funds before the end of the year so you don’t lose them. You can also check to see if your employer decides to participate in a grace period, giving you extra time to spend any FSA funds.
7. Account for any energy efficient improvements made to your home.
The Energy Efficient Home Improvement Credit allows homeowners to credit 30% of expenses for energy efficient improvements such as new windows, doors, HVAC, etc. up to $1,200 with a separate limit of $2,00 for heat pumps, biomass stoves, and boilers.
8. Consider purchasing an electric vehicle.
The purchase of a new, qualified plug-in EV or fuel cell electric vehicle qualifies you for a non-refundable credit up to $7,500.
Andrews & Cole is a certified woman-owned boutique executive search and consulting firm with a focus on accounting and finance professionals. Clients range from start ups to Fortune 100 in nearly every industry.
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