Helpful Tax Planning Information for 2023

For those with employment income, there is still time to make 2022 IRA contributions for Traditional, Roth and SEP IRAs. The deadline is your tax filing date. We are happy to help facilitate contributions for you – if you have questions about whether you previously contributed for 2022, please let us know.

Maximizing contributions to retirement plans can help reduce your tax burden and increase your financial security in retirement. If you are employed but your spouse is not, consider making a contribution for your spouse to a Spousal IRA. If you are a business owner with minor children who have earned income, you may be able to make Roth IRA contributions on their behalf as well.

We are often asked about Form 5498, which confirms retirement account contributions, types, rollovers, and balances. This form is sent out in May each year (since you can make prior year contributions right until you file your taxes) and is not required to file. However, we recommend keeping it on hand for your records.

For 2022, the maximum total contribution to all traditional and Roth IRAs is $6,000 (or $7,000 if you are age 50 or older). Traditional IRA contributions may be tax-deductible – the deductibility of your traditional IRA contribution depends on whether your employer or your spouse’s employer offers a retirement plan. Once your income exceeds a certain threshold, your ability to deduct traditional IRA contributions is phased out. Similarly, your ability to contribute to a Roth IRA is impacted by your tax filing status and income level.

Even if your income level prevents you from contributing directly to a Roth IRA, you may be able to utilize the “back door” Roth strategy. If your employer offers a 401(k) plan, you can probably contribute on an after-tax (Roth) basis, regardless of your income.

One of the most important tenants of our portfolio management philosophy is to maximize efficiencies. Over time, and as your wealth grows, small adjustments compound to create substantial benefits. We apply the same philosophy to financial planning for clients. Each small adjustment, whether it’s saving a few thousand dollars on taxes, maximizing employer matching contributions or consolidating charitable contributions to take advantage of itemized deductions, will accumulate to the benefit of those with a plan.

The table below illustrates the increases for retirement plan contributions from 2022 to 2023 – this year’s increase was particularly generous due to high inflation over the past 12 months. If you have not adjusted your contribution rate from last year, do so now to take advantage of higher contribution limits.

Always consult your tax professional prior to implementing strategies we discuss. If you have additional questions about how specific rules apply to you, e-mail me at Jessica.margetson@invictuspw.com or give me a call (720) 734-2452.

If you have not received your tax documents or need help accessing them, please give us a call. We will coordinate directly with your tax professional to ensure they have your information.

This is the only kind of tax that brings a smile to my face: The Cheese Tax