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Tax Planning Strategies for Personal, Estate and Business Income in 2023

Reef Point LLC · April 20, 2023 ·

Tax Planning Strategies for Personal, Estate and Business Income in 2023 | Reef Point LLC

2023 is already well underway, but it isn’t too late to start planning ways to minimize your tax obligations for the year. It pays to scrutinize your income streams to determine where you can make adjustments that ultimately reduce your Internal Revenue Service bill next April. We suggest personal, estate and business income strategies so that you can cover your bases, no matter your situation.

Personal Tax Planning Strategies

The IRS increased the standard deduction for this year by $900 per income earner. Single taxpayers and married couples filing separately have a standard deduction of $13,850, while the amount for joint filers is double that.

These higher deductions may make itemization less valuable for many, but if you fall in a higher income bracket, you might want to consider the following:

  • Income deferment: Before selling a highly appreciated asset, consider the implications for your taxes. If you want to reduce your tax bill, hold off on the sale or take advantage of a deferred sales trust, which would allow you to offload the asset, receive installment payments and defer capital gains taxes.
  • Maximize retirement contributions: The IRS increased the employee contribution limit for 401(k)s, 403(b)s, and 457s to $22,500 and annual IRA contributions to $6,500. Bulking up your pre-tax contributions reduces your taxable income.
  • Minimize retirement distributions: If you are over 73, you must draw down from your qualified retirement accounts. However, you don’t need to take any more than your required minimum distribution. Additionally, you can distribute up to $100,000 to charity. Your contribution counts toward your RMD but doesn’t count as taxable income.

If you need to reduce your income further, you may want to double up on some of your itemized deductions for this year, making extra charitable donations, for example.

Estate Tax Planning Strategies

Every tax year, you should revisit your estate planning strategies to determine whether they meet your short- and long-term financial goals. Assess your estate’s value to ascertain whether it falls within federal and state tax exemption limits.

If it looks like you might owe estate taxes, you might want to move additional funds into established trusts or create new trusts for your heirs. You can also reduce your estate taxes with donations to qualified charities.

If you are a Trust recipient, you can reduce your income. The IRS levies a 20% tax rate on trust income higher than $14,650, 15% between $3,000 and $14,650, and 0% on anything less than $3,000.

Business Tax Planning Strategies

Your business tax strategy depends on the kind of company you own. If you have a pass-through business — such as a limited liability corporation — your tax strategy needs to focus on ways to reduce your personal income levels. Be mindful of capital gains and losses, utilizing DSTs when possible to sell highly appreciated assets.

If you own a C corporation, you may want to hold off selling assets to reduce your capital gains taxes. You can also offload depreciated assets to balance gains against losses.

Deferred Sales Trusts With Reef Point

IF you are looking to sell your business this year, or an investment property and are looking for a way to defer the capital gains on the sale of your business or an alternative to a 1031 exchange for your investment property, Reef Point is one of only a few qualified DST providers in the U.S. Our team consists of trustees, tax attorneys and investment advisors who work together to ensure you can defer your taxes and meet IRS requirements and income goals. Contact us today to find out if a DST is suitable for you.

 

Sources:

https://www.irs.gov/newsroom/irs-provides-tax-inflation-adjustments-for-tax-year-2023

https://www.irs.gov/newsroom/401k-limit-increases-to-22500-for-2023-ira-limit-rises-to-6500

https://www.irs.gov/retirement-plans/retirement-plan-and-ira-required-minimum-distributions-faqs

https://www.irs.gov/pub/irs-access/f1041es_accessible.pdf

Tax Strategy

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Reef Point LLC was founded by Gregory H. Reese who is one of only 13 Trustees in the US for Deferred Sales Trusts.

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As an authorized and approved Trustee for the Deferred Sales Trust and Member of the Estate Planning Team (EPT), Reef Point, LLC promotes the use of the Deferred Sales Trust™ or other estate planning techniques and is not responsible for recommendations made by other members of the Estate Planning Team, including the Deferred Sales Trust or other tax, legal or estate planning strategies.

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