11 Financial and Tax Planning To-Dos for 2023

Dec. 7, 2023

If the end of the year wasn’t exciting (or chaotic) enough, there are also some financial to-dos to help make sure you’re not penalized or missing important pieces of your financial plan, and serve as an opportunity to check in on your financial journey and make any adjustments going into the new year.

This article highlights to-dos specifically for 2023, though we share more timeless and comprehensive tips in 12 Actionable Tips Before Year-End.

General Planning

There are a handful of deadlines and documents to review each and every year. Here are six to-dos – and any notable changes to them – for you to address before the ball drops.

  1. Clear out your Flexible Spending Account (FSA)
    The CARES Act (2020) temporarily allowed plans to adopt more lenient rollover policies – this is no longer the case. Today, only $610 can be carried over from 2023 to 2024. If you’re currently carrying an excess balance, the CARES Act permanently expanded FSA-eligible items to include over-the-counter medicine, feminine products, and masks, sanitizer, gloves, and other personal protective equipment for you to address health care needs. Just tread carefully as there is “no stockpiling” of items that you realistically couldn’t use allowed.
  2. No RMDs are required for inherited IRAs
    In 2023, the 10-year rule for distributions for inherited IRAs does not apply. In other words, those who inherited an account will not face a penalty if they do not take an RMD this year. However, this opens the door for strategic planning. For some individuals, it might be advantageous to take a withdrawal based on one of the following: anticipated higher income in the future, a lower-than-expected income year, or taking advantage and filling a lower tax bracket.
  3. The deadline to take RMDs is December 31st
    Aside from inherited IRAs, those who have RMD needs should review them, and take by December 31st to avoid penalties. The SECURE Act 2.0 did raise the RMD age to 73, so those born before 1951 will see no change in when to take RMDs, if born between 1951 and 1959, RMDs will begin at age 73 (i.e., 2024 and later), those born in 1960 and after will begin RMDs at age 75 (i.e., 2035 and later). For those who can afford to delay RMDs, proactive tax planning and income smoothing will play a key role in minimizing lifetime taxes.
  4. Review your insurance coverage
    As a result of inflation, existing coverage on homeowners, life, disability, and long-term care accounts may no longer be adequate.
  5. Review your Medicare coverage
    Open enrollment occurs from October 15th to December 7th each year, if you haven’t already reviewed your coverage, then now is the time to do so. It’s best practice to review coverage and shop prices of similar Medicare plans every couple of years. Medicare brokers and agents are a free resource to you as the enrollee, so take advantage of them to ensure you're understanding the plans correctly and choose one that meets your needs.
  6. Consider charitable strategies and in-kind family gifts
    While kindhearted, these charitable acts can also provide tax and financial benefits when done strategically and in scope of your entire financial situation. Qualified charitable deductions, gifting appreciated stock, and in-kind family gifts are all tactics you can use to fulfill your wants. Have a conversation with your financial advisor to see what’s realistic, and don’t wait too long as some can take a few weeks to complete.

Tax Planning at Year-End

As we continue to deal with higher-than-normal inflation, there are some unique planning opportunities to consider in the final weeks of the year.

  1. Year-end Roth conversion planning
    This late in the year, you should be able to reasonably estimate your adjusted gross income, or taxable income, to help determine if a conversion is worthwhile. Some taxpayer’s income can fluctuate drastically year-to-year making it important to check in and see where you are. This article, Is Now the Time to Convert a Traditional IRA to a Roth IRA?, helps outline and compare the pros and cons of conversions.
  2. Complete all contributions before December 31st
    Maximize your 529 plans, salary deferrals, gifts for annual exclusion, and other strategic vehicles by making all your contributions for the year by December 31st.
  3. Double-check estimated taxes and withholdings
    Start by reevaluating based on estimated 2023 income. Those who received large tax refunds, had large tax bills, or had significant changes in their personal tax situation should prioritize reviewing their tax situation and strategies.
  4. Think long and hard about future rates
    Many provisions are sunsetting in 2025, making 2024 an increasingly important planning year. Review what’s changing here: Planning for the Tax Cuts and Jobs Act Sunset in 2025
  5. Review tax-loss and tax-gain harvesting
    Keep an eye on year-end capital gains distributions and review, if necessary, with your team to manage any losses or gains.

Effective planning shouldn’t only happen just at year-end or during the new year. It should evolve throughout the year as life, opportunities, markets, rules, and legislation all ebb and flow.

We can help

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Please consult with an attorney or a tax or financial advisor regarding your specific legal, tax, estate planning, or financial situation. The information in this article is not intended as legal or tax advice.

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