“In this world, nothing is certain except death and taxes.” - Benjamin Franklin
Taxes are rarely an enjoyable topic but by staying aware of critical information helps avoid future headaches. Here’s some information to keep you in the know.
Essential Dates To Know
Here are some critical dates as a taxpayer you must know for 2023:
- Monday, January 23, 2023 – start date for filing individual returns
- Tuesday, April 18, 2023
- Monday, October 16, 2023 for those requesting an extension
Note: an extension to file is not an extension to pay. Make sure any tax owed is paid by April 18th to avoid penalties.
Tax Law Updates
When it comes to financial assets and retirement it’s important to keep up to date on information. We’ve summarized changes that come into effect for the 2022 tax year.
Congress passed the Setting Every Community Up for Retirement Enhancement (SECURE) 2.0 Act. As a result there’s been a number of updates to tax-deferred savings strategies in retirement plans . Some of the major updates include:
- Extending the required minimum distributions – RMD’s – from retirement accounts (again). Depending upon the year of which you were born the new age is either 73 or 75 (1951 – 1959 now age 73; 1960+ now age 75).
- From a tax planning perspective, even though the requirement to withdrawal assets from pre-tax accounts has been delayed, this may be a great time to convert funds to tax-free Roth accounts and potentially reduce future RMD’s. Cornerstone Wealth advisors are available for consultation to discuss this strategy further.
- No impact to starting age for qualified charitable distributions (QCD’s). A QCD is a non-taxable distribution from an IRA owned by an individual who is age 70½ or over that is paid directly from the IRA to a qualified charity. QCD’s count towards RMD’s.
- Effective 2023, ability to contribute to Roth SIMPLE & SEP IRA’s
- Not included in SECURE 2.0:
- Limiting use of Back-Door Roth or Mega-Back-Door Roth contributions
- No new limits on who can make Roth Conversions
Tax rates are set to revert on 1/1/2026 to those in effect under pre-2018 tax law. The new rates will be 10, 15, 25, 28, 33, 35, and 39.6 percent (vs. 10, 12, 22, 24, 32, 35, and 37 percent).
Tax Implication Considerations
Consider contributing to a retirement account. Contributions to retirement accounts like 401(k)s and IRAs are tax-deductible, which means they reduce your taxable income. By contributing to a retirement account, you can lower your tax bill and save for your future at the same time.
2023 Contributions Limits
Take advantage of tax deductions and credits. Tax deductions and credits reduce the amount of tax you owe by reducing your taxable income or providing a direct reduction in your tax bill. There are many deductions and credits available, so it's important to research and see which ones apply to your situation.
Plan for taxes on investment income. Investment income, such as interest, dividends, and capital gains, is subject to tax. By properly planning for taxes on investment income, you can ensure that you're not caught off guard by a large tax bill.
Keep detailed records. Proper record-keeping is essential for tax planning. By keeping detailed records of your income, expenses, and deductions, you can easily calculate your tax bill and take advantage of tax breaks.
By being in the know you can save money and reduce stress when it comes time to file your taxes. Making strategic decisions now so you can maximize your savings and stay financially wise.
This is for informational purposes only and does not serve as personal tax advice. Please speak to a tax representative about your unique situation. At the date of this blog's creation (2/8/23) data represented is considered accurate. Please do your own due diligence to ensure accuracy in the future.
Investment advisory services offered through Cornerstone Wealth Group, LLC dba Cornerstone Wealth, an SEC registered investment adviser.
