2023 Year-End Tax Planning Checklist for Individuals

calendar iconNovember 29, 2023

With 2023 coming to an end, it’s time to set up a meeting with your tax advisor to discuss year-end tax planning. To get started, we have compiled the checklist below with items to consider and actions steps to take for 2023 and looking forward into 2024. Our team of tax advisors looks forward to working with you, your family and your business.

Table of Contents:


Questions to Begin 2023 Planning

  • Have you experienced:
    • Significant life changes during this year: married, divorced, retired, moved, changed job, new babies or kids graduated from college?
    • Significant transactions during this year: new investments, received inheritance, casualty loss, business success or failure?
  • How much capital gain or loss can be taken before year-end?
  • Do you make charitable contributions?
  • Do you receive income from a pass-through business?
  • How will your income change in 2024?
  • Any carryover losses, deductions or transactions from 2022?

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Tax Planning Roadmap

  • Defer income
  • Accelerate deductions
  • Generate losses or match losses with gains
  • Manage classification of income
    • Ordinary vs. Capital
    • Passive vs. Active
  • Review basis in S corporation stock and partnership interest to allow losses
  • Assess impact of Section 163(j) limit to business interest expense
  • Consider gain deferral by investing in Qualified Opportunity Zone Fund
  • Consider like-kind exchange for real property transactions
  • Calculate the potential Section 199A deduction to maximize compensation planning and optimal business structuring
  • Assess the potential impact of Alternative Minimum Tax (AMT) and Net Investment Income Tax (NIIT)
  • Acquire and claim tax credits
  • Evaluate the impact of 2024 income/deductions on actions in 2023
  • Confirm year-to-date withholding and estimated tax payments
  • Calculate the tax due for the fourth quarter of 2023 and April 15, 2024
  • Eliminate an April surprise balance due
  • Consider investments in assets eligible for 80% bonus depreciation in 2023, including real estate through a cost segregation study

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Tax Planning with IRAs

  • No age limit for contributions to traditional IRAs
  • Individuals reaching age 73 in 2023 take first required minimum distribution (RMD) by April 1, 2024
  • RMDs from inherited IRAs may not be necessary in 2023
  • Contribute maximum amounts to IRA, profit sharing, 401(k) and employer retirement savings plans
  • Qualified charitable contribution distributions from IRA funds
    • Up to $100,000 for those age 70 ½ ($105,000 in 2024)
  • Convert traditional IRA or qualified plan amounts to Roth IRA
    • Pay tax now for the benefit of tax-free earnings and no RMDs

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Gifts and Estate Planning

Gifts to family, others

  • Choose assets with a depressed value
  • Shift appreciation out of the estate to donee
  • Maximize the use of the lifetime exclusion
  • Consider the form of gift: outright, in trust or Uniform Transfers to Minors Acts (UTMA)
  • Report carryover basis in asset to the donee
  • Make direct payments for tuition and medical expenses on behalf of others
  • Frontload gifts to Section 529 plan and Achieving a Better Life Experience (ABLE) accounts with up to five years’ worth of annual exclusion

Action steps for maximum impact

  1. Refresh your estate plan
    • Accelerate transfers now
    • Lifetime exclusion is at an all-time high
  2. Review trust documents that are five years old or older
    • Has the law changed?
    • Do the terms accomplish current family goals?
  3. Turn off grantor trust powers
    • Consider release of grantor powers to convert a trust from grantor to non-grantor status if more optimal
    • Explore flexible options for managing income, cash flow and donations
  4. Know your tax basis
    • Strategies for deferring tax gains start with knowledge of the basis in assets
  5. Charitable contribution strategies
    • Make charitable contributions with charitable trust strategies, such as charitable remainder annuity trusts and unitrusts
    • Consider charitable contributions of long-term appreciated stock

Estate tax planning – annual review

  • Review beneficiaries of individual retirement accounts (IRA)
  • Consider endgame strategies for closely held businesses
  • Estimate current values of distressed assets and create action plans for these assets
  • Review retirement plans and legacy plans

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Tax Planning with Trusts

Consider discretionary trust distributions

  • Fiduciary top tax rate at 37% on income over $14,450
  • Compare to top individual tax rate:
    • Married Filing Jointly – $693,750
    • Unmarried – $578,125
  • Remember the 65-day rule, Section 663(b), to make distributions in early 2024
  • Distributions can minimize or eliminate NII tax to Trust

Address potential issues with existing trusts

  • Depressed asset values
  • Reduced dividends and earnings on trust assets
  • Can trust make note payments?
  • Does the agreement allow donors to exchange assets?
  • Can the donor create a new trust to acquire old trust assets under new note terms
  • Asset preservation insurance

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Advice for Final 2023 Tax Payments

  • Review year-to-date withholding and estimated taxes paid in
  • Adjust either to reduce underpayment penalties or tax overpayment in April 2024
  • Consider adjusting tax withholding from wages or IRA RMD
  • Consider making electronic deposits of federal and state tax payments
  • Consider calculating first quarter 2024 estimated tax payments

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We Are Here to Guide You Forward

Please reach out to your Cherry Bekaert tax advisor to begin your year-end tax planning or with tax planning questions in the checklist above.

Questions? Contact Us