5. On the fifth day of Year-End Tax Tips, my tax advisor gave to me, the recommendation to plan for the educational future of my loved ones by year-end.
Setting up a college savings 529 account can offer a plethora of gifts, estate, and income tax benefits. The amount of growth that a 529 account experiences is income tax deferred, and the funds can qualify for educational expenses beyond just college.
6. On the sixth day of Year-End Tax Tips, my tax advisor gave to me, the recommendation to consider deferring my income before year-end.
Income is taxed in the year that it is received, and you should consider reviewing your financial status and seeing if you can defer income to another year and save on taxes.
7. On the seventh day of Year-End Tax Tips, my tax advisor gave to me, a reminder not to forget about the alternative minimum tax.
Most people don’t associate tax deductions with costing you extra money, but you can trigger the alternative minimum tax (AMT) when you accelerate some tax deductions. AMT is figured separately from your regular tax bill and has different rules. In the end, you pay the higher tax bill. This is considered a year-end issue because there are certain deductions under regular rules that are not allowed under AMT.
8. On the eighth day of Year-End Tax Tips, my tax advisor gave to me, the recommendation to think about selling off investments to offset gains.
Another name for this is called loss harvesting. It is a strategy that has you review your stock portfolio and sell off those assets where you will realize a loss in order to offset any taxable gains that you have realized throughout the year.
9. On the ninth day of Year-End Tax Tips, my tax advisor gave to me, a reminder not to forget about the kiddie tax.
The kiddie tax was created as a way to prevent families from shifting their tax bill on investment income from the parents to the children. For 2023, the kiddie tax applies to a child’s investment income above $2,500 at the same rates as the parents. This is something to watch if you plan or did give your child stock, etc., to handle expenses.
10. On the tenth day of Year-End Tax Tips, my tax advisor gave to me, the recommendation to keep an eye on my flexible spending accounts.
Flexible spending accounts have been a great way to put money into an account that avoids both income and Social Security taxes. You should know the terms of your account in order to confirm the grace period set by your employer for setting aside health care expenses.
11. On the eleventh day of Year-End Tax Tips, my tax advisor gave to me, the recommendation to watch my IRA distributions.
Usually, you start to take regular distributions from your IRA by April 1 of the year following the year when you reach 73. There are minimum distribution requirements based on your plan, and an excise tax can be applied to the amount you should have withdrawn based on your age, your life expectancy, and the amount in the account at the beginning of the year.
12. On the twelfth day of Year-End Tax Tips, my tax advisor said to me, get professional adivceeeeeeee.
We now ask that you take these tips and wrap them into your year-end planning as you file your 2023 taxes. Happy Holidays to all!