Tax Planning Actions to Take Before the Year Ends

Tax Planning Actions to Take Before the Year Ends

With the end of the year in sight, now is the time to begin assessing your 2023 tax obligations to see what you could do to reduce your bill.

With the end of the year in sight, now is the time to begin assessing your 2023 tax obligations to see what you could do to reduce your bill. As a first step, ask the professional advisors from Baltimore-Washington Financial Advisors for help estimating what you may owe. Then identify the tax planning strategies that best fit your circumstances. The sooner you start taking stock, the more time you’ll have to ensure your plans are set in place by December 31st. Read on to learn how the team at Baltimore-Washington Financial Advisors, a fee-only fiduciary, can help!

Develop a Base Case

As a first step, contact your tax advisor to prepare a pro forma 2023 tax return. This information can help you understand your current tax situation, and how that may change if you were to realize more income or incur additional deductions for this year. Similarly, ask your financial advisors for a tax summary of year-to-date activities in your accounts to help with the tax estimates. With this snapshot on hand, you can better assess whether it makes sense to implement tax planning strategies before the year ends.

Consider Tax-Smart Strategies

There are a few tax-smart strategies you can implement. One is harvesting tax losses. Financial markets have rallied this year, so you might be facing a steep tax ball for gains. You could reduce the bill by harvesting losses before the year ends. Tax loss harvesting is a classic strategy that might reduce your tax liability. Harvesting losses requires you to sell an investment at a loss. You can then use this loss to offset either the already-realized gains, or embedded gains that you can realize now or at some point in the future.

You may also be able to deduct charitable contributions. It’s always a good idea to time your charitable donations to ensure the associated deductions are effective in the intended tax year. It might take time to complete the transfer, depending on what you plan on donating. Please consult with our team to understand estimated timelines to make sure your donations will be considered to have been made by the end of the year.

Make Tax-Wise Gifts

Currently, an individual can transfer up to $12.92 million of free estate or gift taxes, and for married couples that amount is $25.84 million. These amounts, which are at an all-time high, are set to decrease after 2025 and to limit tax-free transfers to $5 million for individuals and $10 million for married couples. If you have a taxable estate, the capacity and desire to gift, and all or part of your existing lifetime gift and estate tax exclusion is unused, think about acting soon to lock in the extra gifting potential. The team at Baltimore-Washington Financial Advisors can help quantify your gifting capacity, so you’re able to transfer assets without jeopardizing your own future financial security.

For All Types of Financial Services, Contact Baltimore-Washington Financial Advisors Today!

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!