Procrastination is easy, especially when it comes to summertime tax planning. Waiting to implement strategies to reduce your 2023 tax obligations could cost you money. Here are some suggestions to help jumpstart your midyear review:
Safeguard your Deductions
Ensure you can take deductions by keeping great records throughout the year. You’ll need proof if you want tax breaks for things like childcare expenses, charitable contributions, gambling losses, vehicle costs and travel expenses. So create a system to keep track of these expenses.
Save more for Retirement
You can save more for retirement in 2023 thanks to inflation increasing annual contribution limits. You still have time to increase the amount you set aside over the remainder of 2023. This year you can deposit up to $22,500 in your 401(k) and $6,500 into your IRA (additional catch-up contributions apply if you’re 50 or older). You can also contribute to both a 401(k) and an IRA, though tax deductibility on IRA contributions may be limited depending on your income.
Be Tax-savvy about School Savings
If you’re setting aside money in a taxable account to pay for your child’s school expenses, you could realize tax savings by opening a 529 education savings account. The sooner you do this, the sooner your earnings will start growing tax-deferred. Your earnings will also generally be tax-free when withdrawals are used for qualified education expenses.
Adjust your Withholdings and Estimated Payments
If you haven’t already, update your withholdings and estimated tax payments to reflect any changes needed since last year. Updates may be in order if you experience a big life event, such as marriage, divorce or a new job. Overpaying your 2023 tax reduces the cash you have on hand throughout the year, and underpaying can lead to penalties and interest.
This blog provides summary information regarding the subject matter at the time of publishing. Please call our office at 610-296-2500 with any questions on how this information may impact your situation. This material may not be published, rewritten, or redistributed without permission. All rights reserved.
