As a parent, you know that having kids ain’t cheap. Shelling out for Christmas gifts serves as another excellent reminder that a significant part of your income isn’t for you. 

Though, if you’re prone to buying in bulk to get your family fed, you could get a little discount on a Costco membership right now. Every little bit counts, right?

Same goes for having kids and paying taxes. If you are one of those Louisville people who didn’t file taxes in 2021, the IRS is working a little harder by sending letters to make sure you get all of the Child Tax Credit monies the government allotted for you. The American Rescue Plan’s initiative to support families brought about this expanded Child Tax Credit. If you received partial payments of this credit in 2021, it’s crucial to file your 2021 tax return to claim the rest of what’s owed you. That could help offset all that Christmas shopping.

Keeping you nimble when it comes to what can offset your tax burden is the name of the game this time of the year. While it’s the season of spending culturally, with taxes, it should be all about the savings. There’s plenty you can do before we wrap up 2023. And I’m here to help you do it. But time flies and I’ve only got so much time left on my 2023 calendar. Get on my calendar to talk year end tax strategies: 

502-426-0000

Here’s some insight into what we’ll discuss more in-depth in that meeting… 

5 Year End Tax Strategies for Louisville Taxpayers
“Someone’s sitting in the shade today because someone planted a tree a long time ago.” – Warren Buffet

As the year winds down, let’s make sure you’re positioned well for filing in 2024. Despite uncertainties in Congress regarding the extension of various tax provisions in the Tax Cuts and Jobs Act of 2017, there are strategic moves you can make now to optimize your tax situation. So, in that vein, here’s your own little personalized guide to making the most of 2023:

Year End Tax Strategy #1: Smart charitable giving

First, before you set yourself to spread a little holiday cheer with a donation, make sure you do it right. Protect yourself against charity scams and fraudulent organizations by verifying the organization with the IRS’s Tax-Exempt Organization Search. That includes international causes as well. For those, make sure you choose an IRS-approved U.S. organization with tax-exempt status and a specific fund for overseas relief (see the IRS search tool mentioned above). 

Now, as far as year-end tax strategies, charitable giving is one you should be considering, but only if you itemize for it. Some smart strategies include:

  • Bunching Strategies: Bunch your charitable contributions to surpass the standard deduction threshold in certain years, using strategies like donor-advised funds or donating appreciated stock. 
  • Qualified Charitable Distributions: If you’re 70 ½ or older, think about making qualified charitable distributions from your IRA, which can be up to $100,000 per year and won’t count towards your adjusted gross income. This year, you can also distribute up to $50,000 to a charitable remainder trust. 

Year End Tax Strategy #2: Plan your RMDs

As you plan your retirement distributions, remember that the SECURE 2.0 Act, part of the year-end Appropriations Act of 2022, brought several changes, including extending the RMD age to 73 for 2023 and reducing penalties for non-compliance.

The good news is: The IRS has waived penalties for failing to take RMDs from inherited IRAs for 2021, 2022, and 2023, for IRA owners who passed away in 2020, 2021, or 2022. 

And don’t forget… Starting in 2024, automatic enrollment in retirement plans will be mandatory for business owners. For you that means that if you’re eligible, you’ll be automatically enrolled in your employer’s retirement plan, making it easier for you to start saving for retirement unless you actively choose not to participate.

Year End Tax Strategy #3: Digital assets as gifts

With the rise of digital assets like cryptocurrencies, giving digital gifts of this sort is becoming more common. Maybe you’re gifting some crypto assets to your kids or investing in crypto for your and your spouse’s future. Just remember, the IRS is keeping a closer eye on these kinds of transactions. If you’re giving or receiving digital assets, make sure you answer the digital asset question on your tax return correctly and report all transactions. The IRS treats these as property, so capital gains taxes could apply.

Year End Tax Strategy #4: Estate planning

With potential changes to the unified credit looming, consider making significant gifts this year (and before the end of 2025). The current exemption of 12.92 million per individual is a significant opportunity for estate planning. 
(Note: The IRS has confirmed that gifts made under the current credit will not be clawed back into the estate in case of a future reduction.)

Year End Tax Strategy #5: Energy-efficient home improvements

Not that you have lots of extra money sitting around this time of year, but if you want to give a gift to yourself and your future taxes, do some things to make your home more eco-friendly and tax-efficient. The enhanced Energy Efficient Home Improvement Credit now offers up to $1,200 annually. That’s a nice little encouragement to make some sustainable home upgrades. 

Something extra

One really smart move you can make at any time, but especially at the beginning of 2024 is to get your IRS personal identification number. Danny Werfel (IRS Commissioner) describes it as a “secret weapon” against identity theft. You can apply for it on the Get an Identity Protection PIN page, but it won’t be available until January as the IRS performs maintenance on it for the new year. If you’d like to start working on it now, you can also file Form 15227 or you can visit an IRS Taxpayer Assistance Center (TAC).

 

These moves are about more than just tax savings. They’re also about making wise decisions for your financial well-being. 

As a savvy Jefferson county tax professional in your corner, I’m here not just to guide you through these strategies, but to partner with you in your financial well-being.

Let’s walk this out together so you step into the new year with confidence and a solid financial plan.

502-426-0000

 

To a better 2024

Kevin Roberts