Year-End Tax Planning Checklist

Fall will be here before we know it, and that means tax time is coming our way once again. The most effective tax planning happens before year-end — after that, it is often too late! Consider these tax tips, and remember that your tax professional knows your situation best, so be sure to consult with them and your Advisor before acting on a tax-saving strategy.

Tax Planning Checklist

1. Start compiling and organizing your receipts and other paperwork.

2. Delay filing your return until early April if you receive 1099s because you will likely receive amended forms.

3. Consider donating appreciated assets to charities instead of cash. If you can use the deduction this year, but do not know where you want all the contributions to go, consider establishing a donor advised fund with your local community foundation.

4. Review and adjust your income tax withholding on your paycheck and bonuses to match your taxable income.

5. Try increasing your 401(k) contributions so that you are saving the maximum amount of money allowed ($22,500 for 2023, $30,000 if you are age 50 or over). If you can’t afford it, try to contribute at least the amount that will be matched by employer contributions.

6. Consider contributing to an IRA or Roth IRA for you and/ or your spouse.

7. If you are 72 or older, be sure to take your IRA required minimum distributions (“RMDs”) in a timely manner to avoid penalties. Also, if you are subject to RMDs and you donate to charitable organizations, ask your tax professional whether using your RMD to make a Qualified Charitable Distribution (“QCD”) would save you some tax dollars.

8. Review your current income tax situation for potential capital gain and loss harvesting.

9. Be aware of the Alternative Minimum Tax as it applies to your situation.

10. Check the applicability of the Net Investment Income Tax to your situation.

11. Take full advantage of the lower tax brackets by deferring or accelerating income and expenses between this year and next. For example, if you will be in a lower tax bracket next year, deferring income and/or accelerating expenses can help postpone or save taxes. If you will be in a higher tax bracket next year, doing the reverse may also help “smooth” out your tax brackets (and lower your overall tax bill) between the two years. This timing strategy is easier if you are self-employed, but employees may be able to defer bonuses or other income, as well.

12. If you have children under the age of 24 who have investment income, consult your tax professional to make sure you have taken any possible steps to avoid the “Kiddie Tax.”

13. If you have a flexible spending account, observe the “use it or lose it” rules to make sure you do not forfeit any of your contributions.

14. Consider a Roth conversion if you are in a low tax bracket, have funds to pay the conversion tax, won’t be withdrawing the IRA money soon, and do not intend to give your IRA funds to charity.

^{This material has been prepared for informational purposes only, and is not intended to provide, or to be relied upon, for tax advice. You should consult your tax professional regarding your specific situation before engaging in any transaction.}