Tax Planning 2023
Have you considered these strategies?
It isn't too late to
take advantage of tax minimization strategies for your business and
personal scenarios. Here are a few tips to discuss with your CPA:
- Compliance with bank loan requirements - Before you make any
year-end disbursements (such as Section 179 purchases and optional
bonuses), be certain that you will still be in compliance with
your bank loan covenants and conditions. Work with your CPA to run
- Profit sharing contributions- ERISA laws require
compliance within profit sharing plans. If you are planning an end
of year owner contribution, make sure to maintain the appropriate
owner vs employee split (i.e., in order to give employees the same
- Short on estimated taxes? -- Haven't talked to
your CPA all year? If your 2023 income is substantially higher
than projected, you need to make a move to avoid an IRS or State
underpayment penalty. This penalty is essentially additional
taxation, why pay it? Instead, increase withholding for December
or submit an estimated tax payment.
- Purchase equipment. If you're planning on
buying equipment, consider doing it before the end of the year to
take advantage of the Section 179 expense deduction (rather than
requiring the property to be capitalized and depreciated). This
property is generally limited to tangible, depreciable, personal
property which is acquired for use in the active conduct of a
trade or business. Note that equipment must be "placed in
service," not just ordered and/or deposit paid.
- Defer or accelerate expenditures? Depending on your
situation, consider either deferring or accelerating expenses.
- Roth vs 401k -- Did you know that a
lot of 401(k) plans have a Roth IRA option, with no income limit?
In this case, you can still do Roth IRA contributions no matter
the income level income. There are also several other innovation
strategies for using Roth IRAs, including some newer options due
to the Secure Act 2.0, so contact your CPA.
- Deferred bonus - If you are on a
commission and/or bonus program with your employer, did you have
an exceptional 2023? If yes, consider asking your employer to
defer the bonus until 2024. Or accelerate if expecting higher
income next year.
- Sale of rental property - When it comes to
selling rental properties (any class of rental property --
residential, commercial, industrial), many people are afraid of
capital gains taxes on the increased value of the property held
over perhaps decades. In addition, the new "Net Investment
Income Tax" applies a 3.8% surtax on these sales. If a 1031
exchange is not an option in your situation, what can you do? In
any given year, if you have high personal income and also have
rental losses, those losses carry over to another year. However,
when the property is sold those previous rental losses (which in
some cases can be many years) are "released," in that
you can offset the capital gains from the sale by deducting all of
those losses. If you have sold a rental property in 2023, or are
contemplating doing so in 2024, contact your CPA to discuss
strategies to manage your taxation.
MONEY ON TAXES!
Each situation is
different, so contact MyCFO to
make all the right moves. Contact
us today for a free initial consultation!