Top Tips for 2023 US Year-end Tax Planning

In Switzerland, Samichlaus, aka St. Nick, came to children this past night and brought them clementines and nuts. While we cannot transfer food through the internet, we have something almost as good – 2023 US year- end tax tips! This is something we have covered in the past, but like all good things, we have a few tweaks and updates this year.

• For those who haven’t filed the current year’s tax return by now, do so as soon as possible. There are “failure to file” and “failure to pay” penalties, plus interest on the unpaid penalties!
• Contribute to a Health Savings Account (HSA), or open an HSA account, if possible. If participating in a high-deductible health plan, an HSA account may already be an option. Make sure to get the most from these accounts. For single or married filing separately, contributions of up to $3,850 ($4,150 for 2024) per year can be made. For those who use a married filing jointly status, the limit is up to $7,750 ($8,300 for 2024). There is a yearly catch-up contribution allowed of $1,000 for people 55 or older. Additionally, the current year’s contribution can be made up to the due date of the tax return for that year, generally April 15th of the following year. So, there is extra time to sort this out.
• Contribute to an IRA (or open an IRA). There are two types of IRAs: the traditional IRA and the Roth IRA). The main difference between the two is that a traditional IRA contribution may be deductible, whereas the Roth IRA allows for tax-free distributions. Regardless of which is chosen, a total contribution of $6,500 ($7,500 if you’re 50 or older) per year can be made. As above, contributions can be made up to the due date of the current year’s return, generally April 15th of the following year.
• “Make Your Retirement Savings Last as Long as You Do.” People over the age of 85 can consider opening a Qualified Longevity Annuity Contract (QLAC). This is a type of fixed deferred annuity that can be a nice solution for those who are outliving their traditional retirement plans.
• Get that Social Security Number you’ve been putting off for US children. This may save money, headaches, and stress. A child may need a US Social Security number to open a bank account (See Form W-9); and getting a SSN can take some time.
• This year was another roller coaster year with banks being acquired and a turbulent market. For those currently in a net capital gain position but have unrealized losses in their portfolio, consider selling the “loss” stocks and utilize those losses to reduce your gain. (This point is a “tax consideration” point. Do not let tax matters determine your investment strategy.) An overall capital loss of up to $3,000 can be realized for each tax year. Any additional loss may be carried forward. But be careful – do not buy the same stock back the same stock sold within 30 days, or it may be considered a “wash sale,” and that loss will be ignored.
• Plan for next year. While tax information documents will not be delivered or available until early 2024, start making a list of what is expected – documents like W-2s, foreign wage statements, Form 1099s (INT, DIV, B, SA, MISC, R, SSA), and similar foreign-type tax reporting. If stock or other assets were sold, start collecting the information required to report the sale for US (and foreign) purposes (purchase dates, prices, currency, sales date, prices). Word on the street is there will be a new 1099 form coming out for digital assets—look out for action in this space. As always for those living overseas, sort out your local foreign return first before tackling the US return. So, start planning as soon as possible in the new year.

Contact us if you further guidance.

Article written by Hannah Nelson