As the year-end approaches, now is the time for individuals, business owners, or family offices to review their 2023 and 2024 tax situations and look at opportunities for reducing, deferring, and accelerating their tax obligations.
Smart tax planning is as important as ever for taxpayers looking to manage their cash flow while also paying the least amount of taxes possible over time. As the year-end approaches, now is the time for individuals, business owners, or family offices to review their 2023 and 2024 tax situations and look at opportunities for reducing, deferring, and accelerating their tax obligations. The information in this blog will go over strategies that will help you figure out where to save money going into 2024. Read on to learn how Baltimore-Washington Financial Advisors, a fee-only fiduciary, can help individuals with year-end tax planning!
Timing of Income and Tax Deductions
Taxpayers should also consider whether they can minimize their tax bills by shifting deductions or income between 2023 and 2024. Ideally, income should be received in the year with a lower marginal tax rate, and deductible expenses have to be paid in the year with a higher marginal tax rate. If the marginal tax rate is the same both years, deferring income from 2023 to 2024 will then produce a one-year tax deferral and accelerating deductions from this year to next year will lower the 2023 tax liability. Year-end tax planning actions to consider include:
- Consider delaying closing capital gain transactions until after the year and structuring 2023 transactions until after the year’s end.
- Delaying interest and dividend payments from closely held corporations to individual business-owner taxpayers.
Long-Term Capital Gains
Your long-term capital gains are subject to a lower tax rate than other kinds of income. Investors should consider the following while tax planning for capital gains:
- Holding your capital assets for more than a year so that the gain upon disposition qualifies for the lower long-term gains rates.
Charitable Contributions
Cash contributions made out to qualifying charitable organizations, including any donor-advised funds, in 2023 and 2024 are subject to a 60% Adjusted Gross Income (AGI) limitation. Tax paying strategies around charitable contributions might include:
- Creating and funding a private foundation, or donor advised fund.
- Donating appreciated property to qualified charities to avoid any long-term capital gains taxes.
Contact Baltimore-Washington Financial Advisors for help with year-end tax planning this month!
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Baltimore-Washington Financial Advisors is a nationally recognized Fee-Only and Fiduciary wealth management firm, providing comprehensive wealth management since 1986. We integrate investment management, retirement and estate planning, and tax services so you can relax knowing your money is safe. We serve clients throughout the Mid-Atlantic, nationally, and specifically in Annapolis, Baltimore, Ellicott City, Hunt Valley, Catonsville, Pikesville, Bethesda, Columbia, Rockville, Gaithersburg, and more! We’re here to provide you with the best services and advice when you need it. For more information on how we can help, visit our website, or give us a call at 410-461-3900!