Year End Tax Planning

As the holiday season approaches and 2023 draws to a close, taxpayers may assume that the window for 2023 tax planning is also closing… right? Yes and no. Though some proactive tax moves need to happen early in the year to be effective, there are still several end-of-year tactics you may be able to employ. Having a Registered Tax Planner review your case is the best way to make sure you are catching any opportunities for tax savings. To begin identifying year-end tax strategies that could work for you, read my summary below.




Review your income. Start by looking back over your total 2023 earnings. Make note of how you earned your money by reviewing this year’s electronic or paper pay stubs. Pay special attention to your current tax withholding to see if it sufficiently covers your 2023 tax liability. If you need help estimating your correct withholding, the IRS offers an IRS Withholding Calculator | All County Tax Services, LLC to help you.  For added guidance, here is more information:


Recalculate your self-employed tax payments if you have them. If you make quarterly payments for self-employed income, you have one more payment due on January 16, 2024, to cover 2023 taxes due. Check your income-based tax bracket and your 2023 income to ensure you have sent in enough money. If your estimation shows that your tax payments were too low for the past three quarters, you can make up the difference in your January payment. This applies to your state taxes as well. Proactively making accurate payments helps you avoid the underpayment penalty, plus any interest due on unpaid taxes.


Factor in income received through payment apps or online marketplaces. If online sales were a part of your income, you will want to keep an eye out for third party payment records. Sites like eBay and Etsy will be sending you an IRS Form 1099-K if you made more than $600 in sales during the tax year. If you surpassed this threshold, you will have to report the income on your tax return. The recent changes to the third party payment requirements are likely to cause confusion for taxpayers, so it will be especially important to keep clear records and consult a Certified Tax Planner if you need additional help understanding what you owe.


Consider how life changes could impact your tax status. Did you get married or divorced? Did you become a widow or widower during this tax year? Life changes could alter your filing status. The five options are single, married filing separately, married filing jointly, head of household, or qualifying widow(er) with dependent child. The IRS provides a quick guide to help you understand the differences between these statuses.


If you had a child or paid for a dependent’s education, keep in mind that you may be eligible for certain tax deductions and credits.




Depending on the type of retirement account you have, you may have until the end of 2023 or until Tax Day next year to top off your retirement account. The deadline for 401(k) and 403(b) plans is typically December 31st of the current year. This is especially important to remember if you receive an employer match for your contributions. The deadline for traditional or Roth IRAs is the federal tax deadline—the next one is on April 15, 2024.


Since tax-advantaged retirement accounts such as traditional IRAs or 401(k) plans are funded with pre-tax dollars and compound your returns over time, you can lower your taxable income for the year when you make contributions. Taxes are not paid on these dollars until you withdraw them during retirement.


For 2023, these are the numbers you need to know when planning your retirement contributions:


  • Maximum allowable 401(k) contributions: $22,500
  • Additional 401(k) catch-up contributions for taxpayers ages 50 or older: $7,500
  • Maximum allowable IRA contributions: $6,500
  • Additional IRA catch-up contributions for taxpayers ages 50 or older: $1,000
  • Maximum health savings account (HSA) contributions:
    • $3,850 for individuals
    • $7,750 for families
    • An additional $1,000 for taxpayers ages 55 or older


If you have a healthcare flexible spending account (FSA), this is also the right time to check if your employer’s plan offers a grace period beyond December 31st. If not, you will want to make plans to spend any remaining funds in your account.


In addition to planning out your contributions, you will also want to think through any required withdrawals. Most retirement plan types have required minimum distributions (RMDs)—this includes employer-sponsored retirement plans, traditional IRAs, SEPs and SIMPLE IRAs. You can generally start withdrawing funds from these plans at age 59 years and six months. Starting April 1st, the year after you turn 73, you will be required to make annual withdrawals. If you do not, you will incur a significant penalty. If you are at retirement age, consider that certain birthdays will skew the required minimum distributions (RMDs) you must take from your retirement accounts.


The only type of retirement plan without a required minimum distribution is a Roth IRA. If it would be beneficial to your tax strategy, you can still convert some or all of your traditional IRA or 401(k) funds to a Roth IRA this year. Though you will have to pay taxes on these contributions upfront, you will not have to pay income tax on Roth withdrawals in retirement as long as your Roth account is at least five years old. If you anticipate being in a higher tax bracket in retirement, Roth conversions can be a sensible move.


Another way to avoid raising your taxable income if you must take an RMD this year is to use the withdrawal from your traditional IRA to make a qualified charitable distribution (QCD) to a qualified public charity. To make use of this strategy, you need to be at least 70 years and six months old. QCDs max out at $100,000 per year.

If you are a self-employed business owner, you might also benefit from a Solo 401(k). You have until December 31st to open this “one-participant” retirement plan. Since you are both employee and employer, you can contribute both elective deferrals. These contributions are subject to these limits:


  • Up to 100% of your compensation for employee contributions
  • Up to this year’s contribution limit of $22,500 or $30,000 if you are age 50 or older.
  • Up to 25% of your compensation for employer non-elective contributions
  • Up to $66,000 in total for 2023 or $73,500 if you’re 50 or older.




If you anticipate owing significant capital gains taxes this year, you might take advantage of tax- loss harvesting. This popular year-end strategy involves selling taxable investment, like stocks and bonds, at a loss. You can then deduct these losses to offset any capital gains taxes you owe. In 2023, taxpayers can apply up to $3,000 in losses, and if they have remaining losses, they can carry that forward to offset their taxable income in future years. The goal is to defer these income taxes until retirement when, ideally, you may be in a lower tax bracket.


Taxpayers looking to leverage this strategy should bear in mind the “wash sale rule.” This rule states that you cannot deduct a loss for a security that you sold if you replaced it by purchasing a “substantially identical” security within 30 days of the sale (either before or after).

Unfortunately, the IRS’ definition of “substantially identical” is fairly vague, so you may want to consult past examples of allowed and disallowed losses and schedule a more in-depth conversation with a Registered Tax Planner.




The end of the year is also your last chance to tweak your deductions and taxable income to set yourself up for more tax advantages. For instance, you may be able to accelerate some income—to take steps to receive more income during the current tax year—or defer some income depending on when it would benefit you most. The same is true for unreimbursed medical costs: you can deduct any of these expenses that exceed 7.5% of your adjusted gross income (AGI).


If your 2024 property taxes are billed before the end of this year, you can also prepay them and claim this as a deduction. Lastly, if you plan to donate a set amount to charity over the next few years, you can do the math and see if bundling these donations into one year will set you over the standard deduction amount so you can itemize your deductions and save more money.




The new year may hold new legislation that could significantly change your tax situation. For instance, many of the provisions from the 2017 Tax Cuts and Jobs Act are currently set to expire at the end of 2025. Becoming familiar with these changes could help you determine if you should make certain financial moves before or after 2025. A number of the expiring provisions specifically have to do with estate planning. If your estate is worth more than $6 million, make the necessary appointments with an attorney and Certified Tax Planner now to ensure you are ready for the impact of these changes.




Annie works full-time as a photographer and earns extra income as a self-employed freelancer. At the beginning of November, she checks the IRS withholding estimating tool and discovers she will owe a lot in taxes next spring if she doesn’t begin withholding more of her income. She adjusts that amount with her employer.


Annie also checks the 2023 tax tables to see how much she needs to pay on her self- employment income. She discovers that she will not reach the required 90% of taxes due on her next return unless she pays extra on her last quarterly payment for 2023, which is due in January 2024. Annie starts putting money aside and gathering receipts for the professional deductions she will take on her Schedule C form.


A photography client offers to pay Annie a four-figure fee in either late December or early January. Annie estimates that her taxable income and tax bracket will be slightly lower in 2024, so she decides to defer the income to January. Annie also makes a dental appointment for the week between Christmas and New Year’s Day. This appointment drains the remainder of her flexible spending account (FSA), which is well-timed since any unused funds would disappear after December 31st.




Scottie, age 58, contributes to a 401(k) through his employer and has a traditional IRA. He can only afford to contribute to one of his retirement accounts between now and the end of 2023, so starting in November, he concentrates on the 401(k) and contributes the maximum amount.


Scottie then gets a windfall from a relative just before Thanksgiving. Since he expects to be in a higher tax bracket when he retires, he has been advised by a Certified Tax Planner to look for an opportunity to convert his traditional IRA to a Roth IRA, so he does not have to pay income tax on withdrawals during retirement. With this windfall money, Scottie can afford to pay the income tax on the Roth conversion now, so he makes the conversion on December 30th and keeps detailed records in case the timing is ever questioned by the tax authorities.




Whether you are looking to accelerate or defer income, to increase your retirement contributions or make a qualified charitable distribution, most taxpayers can find some end-of-year tax strategy that will benefit them. Now is the time to take action and employ these final changes before 2023 comes to a close. Self-employed or gig-working taxpayers will want to recalculate their taxes owed and make sure they cover the remainder in their January 2024 quarterly payment.


For expert advice on how you can still maximize your tax savings for 2023, please don’t hesitate to reach out.  Schedule an appointment here: