Building Blocks

The Building Blocks

We’ve already talked about the importance of making a list, however, it is just as important to be aware of financial planning opportunities as we move through 2023 and approach the April 18th tax deadline.

Not-so-fringe benefits

For profit-sharing or cash balance/defined benefits plans, businesses have until they file their on-time or extended return to make 2022 contributions—leeway intended to give businesses time to make what can be complex calculations about employee wages and benefits and company finances. If you know what your obligation is for either of those plans, it’s better to contribute sooner than later, especially if markets are down. Not only is this smart from a dollars and cents standpoint, but it’s also an easy way to decrease a company’s exposure and liability. These types of plans are covered by the Employee Retirement Income Security Act (ERISA), which ensures that monies in qualified plans are protected from creditors.

Roth conversion consideration

This is a recurring item of emphasis, but that’s for a very good reason. A Roth IRA conversion is an important tax planning tool and can help minimize your taxes over time. And because you will only be taxed on the value of the funds at the time you convert them, doing so when the market is lower than usual means that every dollar of value those assets generate when the market goes up in the future is essentially tax free.

Dotting your I’s and crossing your T’s

Make sure you talk to your advisor and explore all the ways to potentially save or manage debt more efficiently. For example, because of recent tax law changes, it might make sense to bunch your itemized tax deductions. Essentially, you lump as many itemized deductions into one year as possible, and then in the following year take the standard deduction. This strategy can potentially lower your tax burden by thousands of dollars.

Donor Advised Funds

Setting up a donor-advised fund is a great way to maximize the tax benefits and lock in years of charitable contributions—which can subsequently be made as directed by you in the future. This can not only reduce your current income tax burden, but it can also eliminate any capital gains tax on long-term appreciated assets. It’s a great way to make sure that the charitable causes you care about end up with the same amount of money while maximizing your own tax benefits in the process.

Gift Planning Strategies

If you missed your gift-giving deadlines for 2022, don’t despair. The holiday season might be well behind us, but it’s not too late to develop a gifting strategy. While the annual gifting limit is now $17,000 in 2023, there are strategies available to those who want to explore gifting above those annual limits.


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