UPDATE: 2023 Year-End Tax Planning Checklist

Nov 28, 2022 |

This article reflects changes for 2023.

With a few weeks remaining in 2023, there are still relatively simple end-of-year tax planning tactics available to help lessen the burden in April 2024.

Verify Withholding and Correct Underpayments

Now is a good time to double-check your withholding and make any necessary adjustments.

Although increasing your final estimated payment will only correct a Q4 2023 underpayment, increasing withholding can correct underpayments retroactively. IRS lumps all withholding payments together and treats them like they were made in equal parts across all four quarters.

If you are working with a tax professional, they will likely have already done projections to ensure accurate estimated payments for investment and other income. But if you are doing your own taxes, visit the IRS withholding calculator and see what, if anything, needs to be done.

Max Out Your 401(k)

The maximum tax-deferred contribution to a 401(k) retirement plan reached $22,500 for individuals under age 50 in 2023. Individuals who are 50 or older by the end of the calendar year can make additional “catch-up” contributions of up to $7,500, for a total of $30,000 in 401(k) contributions in 2023. If you have celebrated, or will celebrate, your 50th birthday in 2023 and haven’t taken advantage of the catch-up contributions, there’s still time to do so before year-end.

Maximize HSA Contributions

If you are eligible to contribute to a health savings account (HSA), remember that the IRS has increased the maximum allowed contributions to $3,850 for an individual or $7,750 for a family in 2023. Individuals who are 55 or older by the end of the calendar year can make additional “catch-up” contributions of up to $1,000.

Since money in an HSA account remains yours and contributions reduce taxable income, maximizing contributions is a smart tax planning move. Everyone eventually has medical expenses, and using pre-tax money to pay for them is almost as good as getting a 20 percent (or more) discount.

Year-End Gifting

The annual gift tax exclusion amount increased to $17,000 in 2023, and married couples can double that to $34,000. These tax-free gifts can be a useful estate planning tool. If you are not already taking advantage of the annual gift tax exclusion to move assets out of a potentially taxable estate, you should discuss such gifting with your estate planning team.

Final Words

Not every one of the above tips will be useful for every person. Still, anyone who is able to use more than a few of them may well be able to benefit from the more advanced personalized planning offered by our financial planning professionals.

This article was originally published on December 12, 2018. Subsequent updates were made on November 8, 2019 and December 14, 2020, and November 17, 2022, and October 31, 2023.

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