Tax tips to take advantage of before the new year – 47abc

SALISBURY, Md – The final month of the year might have us counting down until that ball drops, but tax experts say its also a crucial month to capitalize on tax relief opportunities for people and businesses.

Mark Welsh of UHY Group in Salisbury says individuals and businesses have multiple options to take advantage of before the ball drops this New Year’s Eve.

For Individual or Family filers 

Welsh says itemized amounts are $27,700 for married and $13,850 for single filers for 2023.

1. If you itemize, you should consider making charitable gifts to a qualified charity.  Besides cash, this can also be stocks, bonds, real estate, used vehicles, and used boats.

2. If you itemize, start looking at your medical and dental expenses (out of pocket).  This includes insurance premiums.

3. Tax Loss Harvesting. This strategy involves selling investments at a loss to offset capital gains, which can be advantageous for reducing taxable income. If losses exceed gains, you can use up to $3,000 to offset ordinary income, and any remaining losses can be carried forward to future years.

4. Looking at Contribution Limits of Retirement Plans (401K)—Employees can put away $22,500 tax-deferred in 2023 and another $7,500 if they are 50 years old and above.

5. Looking at Contribution to an IRA—Taxpayers with earned income of $6,500 or more can put away $6,500 in 2023, plus another $1,000 if over 50 years old.

6. Looking at HSA Contributions– If you are eligible to contribute to an HSA, contribution limits are $3,850 for self-only coverage and $7,750 for family coverage for 2023, with $1,000 more in catch-up contributions for those 55 and over.

7. 529 Plans— If you have children, and grandchildren, or are considering further education for yourself, consider contributing to a 529 college savings account , where any growth accrues potentially tax-free.  It is $17,000 for Single and $34,000 for married per year.  It does not count as your annual gift exclusion (see below).  If you file in MD, you could get a $2,500 deduction on your MD income tax return for each beneficiary. In DE you will get a $2,000 tax deduction for a married couple.

8. Required minimum distributions (RMDs) are the minimum amounts you must withdraw from your retirement accounts each year. You generally must start taking withdrawals from your traditional IRA, SEP IRA, SIMPLE IRA, and retirement plan accounts when you reach age 72 (73 if you reach age 72 after Dec. 31, 2022). Welsh says those required payments typically don’t notify seniors, and are important to withdraw before being hit with a penalty.

9. Gifting—Each Spouse can each gift $17,000 in 2023 without having to file a Gift Tax return with the IRS.  That means a husband and wife can each gift $17,000 to a child or grandchild.

10. Estate Planning—Now is a good time to see a tax professional about updating your Estate Planning and maximizing the transfer of wealth from one generation to another.

 

For Cash-based LLC Businesses 

Welsh says the majority of businesses on the shore are cash-based, meaning they do not earn revenues based on accruals but rather on sales.

Businesses that have revenue (income) that exceeds operating expenses should look to certain yearend tax strategies to minimize taxable income (revenue-operating expenses=taxable income.

“The idea here is say I made $200,000 in revenue, I don’t want to be taxed on all that so the purchases I need for 2024 I can make them this month and they help to put a dent on what you are taxed,” Welsh said.

Welsh tells 47ABC other tips include:

1. Depreciation-Based Deductions—Business should first look to business equipment and business vehicle needs.  If the business equipment and vehicle is purchased by and out into service by December 31, 2023 the business can deduct (depreciate) a large portion, if not all of the cost of that acquisition in 2023.  This is the fastest way to maximize operating expenses.
2. Year End Employee and Christmas bonuses.
3. Review building and equipment repair and maintenance needs.  Consider making those repair and maintenance expenses in December 2023 to accelerate those expenses into 2023.
4. Consider accelerating supply orders you would normally pay next year before December 31, 2023.
5. Reimburse yourself for business expenses you personally paid by December 31, 2023.
6. If you itemize, start looking at your medical and dental expenses (out of pocket).  This includes insurance premiums.
7. In general, consider accelerating any operating expense that you would normally pay early next year by December 31, 2023.  Examples would include office supplies like postage, envelopes, paper, letterhead, toner for the copier.