2023 Year End Tax Strategies

Shawn: Want to lower your 2023 taxes with strategies like charitable giving, retirement plan contributions, and medical expenses? Small moves now could save you thousands. Let’s get some perspective. Bob: Welcome to another episode of Christian Financial Perspectives. We’re so glad that you joined us. My name is Shawn Peters. I’m joined as always by my co-host and father-in-Law, Bob Barber. And today we’re going to be talking about everyone’s favorite topic, taxes. Just kidding. So these are strategies though to help you with your year end tax planning. And we’re bringing this to you in early November. So there is still time. So if you hear anything in this program today and you want to implement it, hopefully there’s still time. However, we do want to bring this with a warning. If you listen to today’s program, it could help you save thousands of dollars possibly in tax. So if you don’t like that, you might want to stop listening here. Yeah, we’ll go watch a paid subscription service of something. Shawn: We’ll give everyone a second if they want to leave. Okay. Those of you who are still here, let’s get into it. Bob: So we’re going to get through this in about 15 minutes. So it’s worth about what, a hundred dollars per minute? Shawn: Yeah. Something like that. Bob: Yeah. Awesome. At least that much. Shawn: Alright. Obviously results may vary, depends on what your tax situation is. Bob: That’s exactly right. Shawn: However, let’s go ahead and start with the scripture. Mark 12:16-17, “They brought the coin and he asked them, ‘Whose image is this?’” By the way, we’re talking about Jesus here. Bob: Yeah, right. Shawn: “‘Whose image is this and whose inscription?’ ‘Caesar’s,’ they replied and then Jesus said to them, ‘Give back to Caesar what is Caesar’s and to Godwhat is God’s.’ And they were amazed at him.” I’ve always loved this verse. I remember my dad would always say, you give to Caesar what is Caesar’s, but the part that I guess Jesus left off or implied was, “And not a penny more.” Bob: Exactly. Shawn: So that’s really what this is about is it’s talking about legal tax strategies because yes, you need to pay taxes that are owed, but that doesn’t mean you need to pay any more than you have to. That’s the goal here. Bob: And believe it or not, I’ve heard Ron Blue say this, don’t complain about paying taxes, that’s God’s provision. And you can always pay less. Just make less. Shawn: Just make less. Exactly. Bob: And please be honest about your taxes. Don’t try to hide income. It’s not a good idea. And I’ve heard people say, well, you need to pay me in cash. Well why? Well, so I don’t have to report it. Well, that’s wrong. I don’t care how you look at it. That’s wrong. You need to report it. Shawn: That’s right. So before we get started on the year end tax strategies for 2023, we encourage you to run any of the things that we’ve talked about. We make sure run them by your CPA or other tax professional. These strategies are very individualized to the person using them. So they may or may not apply. And we are not tax professionals. So we’re doing this in good faith to try to help point you in the right direction. So with all the fun legal disclaimers, I guess, out of the way. Bob: Yes, exactly. Shawn: Let’s get started. Bob: So I think the first thing, as we get started, is to know this number throughout all of these strategies and that is the standard deduction. And the standard deduction for 2023 for a single person is $13,850. And for a married couple filing jointly is $27,700. That’s where most of us fall. Now, if you’re single and you have a dependent at home, that goes to $20,800. The reason we are going to go over this is because you got to get over these standard deductions Shawn: For the itemized deductions to make any sense. If you already know, just ballpark that you’re not going to be really even close to those numbers. Don’t waste your time doing the itemized deductions. Bob: But we’re going to tell you how those itemized deductions can add up to more than the standard deductions so that you do have some tax strategies here and take some money off of those taxes. Okay. Shawn: Now the one exception to that standard deduction is sometimes there may be a qualifying disaster in your area like hurricane or wildfire. So again, talk with your CPA or tax professional. Look into that. But these are just the standards. Bob: Because that could be a deduction. Exactly. Shawn: So once you figure out your standard deduction for your particular area, you then have a choice to claim it or use the itemized deductions if they’re, again, more than the standard deduction, but you can’t do both. So either use the standard or you itemize. Bob: Okay. So some things – we’re going to get into 10 of these very, very quickly. We want to point out, many of you think about your property taxes right up front. That is usually a standard deduction, but the max you can go there is $10,000. So, if you have two homes, we have a second home in Rockport, Texas, our two homes total more, the property taxes total more than $10,000, but we can only take $10,000. It’s the same way with mortgage interest, which is a really big one that most of you all think about. The maximum amount that you can take towards the mortgage, think about your loan. If you’re loan is between $750,000 and $350,000, you can only deduct the interest on that amount of money. Okay. 350k if filing separately, 750k filing jointly. Shawn: So if you have a really large expensive home, you may not be able to deduct all of that. Bob: Right. Shawn: Gotcha. Bob: Yeah, we don’t have many that fit into that category, but if you had a $900,000 mortgage, you’re only going to get to deduct the interest on $750,000 of that. Okay. Shawn: Alright. Bob: Strategy number one. Shawn: Strategy number one, lump together all the itemized deductions so you can get over the standard deduction limit. Bob: Exactly. Yep. And you want to try to do this – sometimes what this means is taking deductions that you can take and putting them into one year versus two different years. Shawn: So two good examples of that would be, let’s say your property taxes are around $5,000 for the year. Well, you could go ahead and pay the latest tax bill that you had as well as next year’s property taxes before the end of the year. So you at least get that 10k and then in that given tax year, you’d be able to deduct the full amount from both years. The downside of course, is the next year you’re not going to be able to deduct any of the property tax. But again, depending on your situation, it could be a good thing to do. Bob: So here’s your tax strategy, year end tax strategy right now. If you paid your taxes and there were around $5,000 for property taxes, if you paid that in January of this year, go ahead and pay before December 31st of this year. But then again, you won’t have the deduction for next year. But now that should total to be enough to get you up there towards that standard deduction. Shawn: And another one might be charitable giving. So maybe you make your giving at the end of the year, but if you can afford it from a cashflow perspective, maybe go ahead and do both years at once before the end of the year for your charitable giving. And why would you want to do either of these? Why would you want to do this or maybe do the double property taxes? Well, what if you got a bonus this year, for example, and next year you don’t know if you’re going to necessarily get that. Well that would be a great example of why you might want to go ahead and double up on some of those normal annual things is to try to help reduce those taxes. Bob: Tax strategy number two, this is the one, Shawn, that I see probably 90% of our audience and of our clients here not taking advantage of and I don’t know why, but they’re not maxing out their qualified retirement plans. Shawn: So strategy number two is max out qualified plans. Bob: And we’re talking about that 401K, you may have a 403B if you work for a nonprofit or a hospital, 457 or TSP plan if you work for a government agency. You can really put a lot of money away. For this year, you can put $22,000 up to $22,500 in that qualified retirement plan. From your side, this is without the match. Shawn: Not including the employer match. Bob: And if you’re over 50, you can add another $7,500 to that. So now you, you’re getting up to $30,000 if you can afford to do it. Shawn: If you’re 50 or older. Bob: Shawn, think about this. I meet people all the time. They’re putting $10,000 in their plan and they could put that $22,500, but let’s just say they put another $10,000, and in the higher tax bracket it’s like 24%. You have immediately saved $2,400 by getting this idea. Shawn: That’s right. Bob: Right now that quick. And we’re just at the second strategy. Shawn: Yeah. Bob: Okay. Shawn: So max out the qualified plan is basically the – and that’s good advice in general, not even just from a tax perspective, just because it allows you to put away more for the long run and do that before you even look at, oh, maybe I should add some more money to a non-qualified account to a taxable account. No, max out your 401k. Get that deduction. Bob: And we mentioned tax strategy number three was large year end gifts to charities. Shawn: That’s right. Bob: You need to understand here, too, it doesn’t have to be cash. It can be things like stocks or maybe a property, small lot that you have that you don’t plan on building anything on it. You’ve had it forever. It’s just growing grass on it and costing you taxes and maintenance every year keeping it mowed for the city regulations. Shawn: You can even donate old cars. Bob: I always hear the advertisement, “Cars for Kids”. I’ve sang that song in my head. I hear I’m singing that song and I’m like, get that out of my head. There’s a limit to what you can put. Most people are not going to fall into that limit, Shawn, but it’s up to 60% of your adjusted gross income and certain types of donations may be limited to 2030 or even 50% depending on the type of contribution when it comes, like the car or the property. Shawn: That’s right. Alright, so tax strategy number four, sales tax. Buy the new car if you need one. But there’s a $10,000 limit with property taxes. Bob: So it comes under the same rules. So, you have your property taxes, let’s say your property taxes for $7,000, but you’re going to go out and buy a new car and the sales tax is $3,000. You can add those together. You’re at your $10,000. Shawn: So, they’re not exclusive is what we’re saying. Bob: I’m not saying don’t go buy a new car for that reason. Please. Shawn: Well, it could be new to you. It could be new. We are not necessarily saying you need to buy a actual brand new car, but let’s say your property taxes are a little bit lower, maybe they’re only 3,500 so you could pay this year and next year’s. And then the car, you’re like, well we did need to get the car anyway, we’ve been saving up and thinking about it. And if the property tax on that is around $3000 or so, okay, great. Well then between the sales tax, yeah, sorry, the sales tax and the doubling up in the property tax. There you go. Now, you’re at your 10K. Bob: That’s your incentive now to buy before the end of the year, buy that shiny new car or that shiny new used car. Boy, this is one I see a lot of people miss out on. Okay, tax strategy number five, you’re going to see an immediate tax advantage here. Probably going to save depending on what bracket you’re in, but let’s just say 20% here, you’re going to save maybe $1,300-$1,400 right here again. Shawn: So the strategy number five is the health savings account. So you want to try to max out those because it’s going to help you reduce the taxes. But also that means there’s more money that you can actually use for yourself and your family. Bob: And you can put $3,850 in there if you’re an individual, $7,750 if you’re family. Alright. Plus if you’re above 55 you can add another thousand to that. So Shawn, all of a sudden now you’re at $8,750, you’re at that 20% bracket. You realize for some people we’ve already saved them $4,000 or $5,000 from this first 10 or 12 minutes. Shawn: And I accept tips in cash or check. Bob: We’re going to have to zip through these to get through the rest of these. So year end tax strategy number six is medical procedures. Now this is limited to 7.5% of your income, but if you’re going to get a medical procedure anyway and maybe possibly do that before the end of the year, but let’s say you make a hundred thousand, it’s got to go over $7,500 to cost you and normally you’re going to hit your deductible. Shawn: That’s elective or mandatory. Just if there’s been something that you’ve been needing or wanting to get done. Well there’s an option. I always say spend the money on yourself or your family or charity if you can do that instead of giving the government more money. Bob: Now, Shawn, this next strategy number eight is when we use a lot around here, we always look at December and we say what do we need? Shawn: So, strategy number eight, business equipment. So if you own a business and there’s something you need with furniture, copiers, automobiles. I know my dad’s been in farming and mining for a long time and he would always tell me, well I guess we need new tires. And when you have big machines, those tires are expensive. Hey, may as well spend it on something you can use. Bob: And maybe you just have a small home business but you need a new computer. Go ahead and buy that. That is a business deduction. It’s considered business equipment. Shawn: So strategy number eight, tax loss harvesting. If you have investments that have fallen below your purchase price, use the resulting loss to offset capital gains in future or this year. Bob: And you say maybe you’re like, well I don’t want to sell that. Well you can buy it back in 31 days. So it’s a great idea, Shawn. I used this last year in a huge way because we had a property that we sold on a major highway that had a big gain in it. And last year when the market was down, I pretty much sold out my portfolio in the bottom of the market then bought back a light kind portfolio, but not the exact same holdings. Shawn: Because you can’t buy the same holdings. Bob: No, you can’t. I waited 31-32 days. Then I went back in and went back into those holdings. Shawn: Well, we did the same thing for our clients, too, in taxable accounts is we made sure to, well hey, let’s go ahead and do some tax loss harvesting. And so then in future good years, if you can’t use it this year, then you’ve got some tax losses you can write off. Bob: It’s a big one I think a lot of people don’t think about. But a very good one. Shawn: Tax strategy number three is use your required minimum distributions or RMDs. Bob: If you’re 73 or above Shawn: And you have them, but use your RMDs and direct them to charity. It’s known as Qualified Charitable Distribution, QCD. Bob: Right. So we say do this and we emphasize this to our clients here. I think it’s a great idea. If you’re a tither, and this is Christian Financial Perspectives and you give the charities, instead of giving cash give from your IRAs/your RMDs if you’re in that stage now. If you’re above 73, I know our listeners are younger because it is YouTube and podcasts, tell your grandma and grandpa about this one. Okay. Alright. And then we’ve come down to our 10th one. Shawn: That’s right. Number 10, income timing. And I’ll let you cover this one. Bob: Okay, well this has a lot to do and I work with a lot of people that get bonuses at the end of the year and they may not get that bonus next year. They may be retiring next year. So see if you can delay getting that bonus until next year when you’re in a lower tax bracket. Shawn: That’s right. Bob: That’s the main thing. Shawn: And I think when you’re going to be retiring next year, that is definitely the perfect one where if you think I’m going to be working until the start of the summer next year, well ask your employer, Hey, instead of give me the Christmas bonus, can you give me that bonus in March? Bob: Yeah, well there you go. There’s 10 strategies. I think if we were to total these up, it’d be a lot more than the $1,500 we talked to you about. But I hope this has been very productive for you. This is about a 15 minute program today, so it’s about a hundred dollars per minute. Shawn: That’s right, that’s right. And obviously, all joking aside, yeah, don’t send us actually any cash tips or anything like that. Bob: No, we don’t want that. Shawn: Too many compliance issues. But you can comment, like this video, share it with your friends, subscribe, all those would be much appreciated. So thank you. And as always, God bless you. [DISCLOSURES] * Investment advisory services offered through Christian Investment Advisors Inc dba Christian Financial Advisors®, a registered investment advisor registered with the SEC. Registration as an investment advisor does not imply a certain level of skill or training. Comments from today’s show are for informational purposes only and not to be considered investment advice or recommendations to buy or sell any company that may have been mentioned or discussed. The opinions expressed are solely those of the hosts, Bob Barber and Shawn Peters, and their guests. Bob and Shawn do not provide tax advice and encourage you to seek guidance from a tax professional. While Christian Financial Advisors® believes the information to be accurate and reliable, we do not claim or have responsibility for its completeness, accuracy, or reliability.