Home|Who We Are|Our Services|Resources|News Center|Contact Us|Client Access
More Articles  Printer Friendly Version


2023 Year-End Tax Planning, Part 1

5169 1

Year-end tax planning in 2023 can make a big financial difference in retirement funding and how much you leave your heirs. Here are some tips, situations, and useful ideas written by a real human with decades of experience in year-end tax planning maneuvers.

Back-Door Roth IRAs. Roth IRAs, if you follow the complicated rules, provide tax-free income in retirement. In addition, they can offer your heirs favorable tax treatment by naming them as beneficiaries. However, high-income earners cannot contribute to a Roth IRA account if they earn more than $228,000 in 2023 and file jointly ($153,000 for single filers). The back-door route sidesteps the income limits. Taking the back-door route is a completely legal method under IRS rules. Instead of contributing directly to a Roth IRA account, a three-step process is involved: (1) contribute to a traditional IRA account, (2) withdraw all or part of the traditional IRA account and pay income taxes on the withdrawal, and (3) place the amount withdrawn in a Roth IRA account. Paying income tax on the amount withdrawn from the traditional IRA may be a bitter pill to swallow right now, but it converts that amount to a tax-free account. The limits are based on modified adjusted gross income.

College Funding Overachievers. Parents and grandparents who saved more than what’s needed in a 529 College Savings Plan account can convert the leftover amount to a Roth IRA. When a child gets a scholarship or elects to attend a state school with low tuition, the assets are eligible to be transferred to a tax-free Roth IRA. Up to $35,000 of 529 assets left over after a child attends undergraduate and graduate studies can be placed in a Roth IRA account, where it will never again be taxed, according to federal tax law.

Think Ahead. Reducing federal taxes in 2023 and 2024 depends largely on what’s going on in your life. Do you have a wedding coming up? Expecting a grandchild in 2024? Are you changing jobs? Planning for personal and job changes is one of the benefits of our advice. For instance, planning a large withdrawal to pay for a wedding in 2024 lets you plan to raise cash slowly. This could be better financially than making one large withdrawal all at once, since stock and bond prices are volatile.

Although the end of this year is more than four months away, these three year-end planning tax tips require serious attention and beginning sooner is smart. We’ll have more year-end tax tips next week, unless more important personal financial and tax planning news breaks.

Nothing contained herein is to be considered a solicitation, research material, an investment recommendation, or advice of any kind, and it is subject to change without notice. Any investments or strategies referenced herein do not take into account the investment objectives, financial situation or particular needs of any specific person. Product suitability must be independently determined for each individual investor. Tax advice always depends on your particular personal situation and preferences. You should consult the appropriate financial professional regarding your specific circumstances. The material represents an assessment of financial, economic and tax law at a specific point in time and is not intended to be a forecast of future events or a guarantee of future results. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete, and is not intended to be used as a primary basis for investment decisions. This article was written by a professional financial journalist for Advisor Products and is not intended as legal or investment advice.

Email this article to a friend

Fed Governor Kugler Details Inflation And Economic Outlook
Why Rates May Not Be Cut Until June
Practical Suggestions For Achieving Your 2024 Resolutions
A Sign Of Progress In Solving U.S. Economic Problems
Fed Keeps Rates Unchanged; Expects Easing In 2024
Have You Logged Into Your Social Security Account?
The Great Fake Out Of 2023 Is Poised To Extend Into 2024
Financial Crime Snitches Are In Stitches, Exacting Revenge Against Dishonest Former Employers
Amid A Confluence Of Crises, Keep Financial History Top Of Mind
The Federal Reserve Decided Not To Raise Rates
Finding The Truth About Long-Term Investing Is Too Hard
The Conference Board Predicts Short, Mild Recession For First Half Of 2024
The Coming Reversal of Tax Cuts and Jobs Act Will Be a Financial Setback for America’s High-Income-Earners and High Net-Worth Individuals
What The Federal Reserve Decided Today
What To Know About Converting To Roth IRAs

This article was written by a professional financial journalist for Responsive Financial Group, Inc and is not intended as legal or investment advice.

©2024 Advisor Products Inc. All Rights Reserved.
© 2024 Responsive Financial Group, Inc | 204 W Wing St, Arlington Heights, IL 60005 | All rights reserved
P: 847-670-8000 | F: 847-590-9806 ben@rfgweb.com |
Disclosure | Contact Us
Responsive Financial Group, Inc. is a fee-only registered investment advisory firm in the State of Illinois. Information on this site is compiled from multiple locations and is believed to be accurate. Incorrect information may come from these outside sources. Should you notice anything please notify us immediately. Thank you!