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Year-end tax planning checklist for 2023

Theresa Marx

November 10, 2023

As 2023 draws to a close, it’s important to think about your year-end tax planning. Our Wealth Strategies team provides this handy guide to get started.

Year-end tax planning should be a part of everyone’s financial routine. The checklist below serves as a starting point to think about planning in today’s economic and legislative environment, as well as items that are important to consider every year. As always, we encourage you to speak with your CIBC Private Wealth advisor and outside tax advisors to help ensure that you are taking full advantage of all year-end tax savings opportunities.

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Income tax

  • Consider the timing of harvesting capital losses to offset capital gains
  • Consider whether to accelerate or defer income and deductions
  • Be mindful of possible Alternative Minimum Tax (AMT) implications, especially if you itemize a lot of deductions or have exercised incentive stock options
  • Consider the impact of the Kiddie Tax
  • Review the use of your net operating losses
  • If you are a trustee, consider whether it is appropriate under the terms of the trust agreement to make distributions to current beneficiaries (who may be in a lower tax bracket than the trust)

 

Planning tip: As we get closer to 2026 and the potential sunset of the Tax Cuts and Jobs Act of 2017, the acceleration of income may become more important with potentially higher income tax rates on the horizon. 

 

Lifetime gift planning

  • Determine whether to make significant lifetime transfers
    • Consider taking advantage of current high transfer tax exemptions ($12.92 million in 2023) and potentially lower asset values
    • Evaluate whether flexible planning strategies meet your personal and family needs
  • Review the use of annual exclusion gifts — the current annual exclusion amount per individual is $17,000
  • Review the use of the gift exclusion for payment of tuition and medical expenses

 

Planning tip: The annual exclusion amount and the gift, estate and generation-skipping transfer tax exemptions will increase again in 2024 to $18,000 and $13.61 million, respectively.

Keep in mind that if the Tax Cuts and Jobs Act of 2017 sunsets in 2026, the federal gift, estate and generation-skipping transfer tax exemptions will be significantly reduced to $5 million, adjusted for inflation. Making large gifts before 2026 may allow you to lock in current historically high exemptions. 

 

Charitable giving

  • Consider combining multi-year gifts into one year using a donor-advised fund for a potentially larger tax deduction
  • Consider donating appreciated capital gain assets that have been held for more than a year
  • Consider making cash gifts to eligible charities to take advantage of charitable deductions of up to 60% of adjusted gross income (AGI)
  • Consider making a tax-free contribution directly from an IRA to a charitable organization (a QCD)

 

Planning tip: The QCD rule allows individuals who are 70 ½  or older to donate up to $100,000 each year to one or more charities directly from a taxable IRA. This $100,000 amount will be indexed for inflation starting in 2024.

 

Retirement planning

  • Consider a Roth conversion for your IRA
  • Plan for IRA and 401(k) distributions
  • Maximize retirement plan contributions

 

Planning tip: With the enactment of SECURE 2.0, individuals must now begin taking required minimum distributions (RMDs) at age 73. If you turned 73 this year, you have until April 1, 2024, to take your first RMD.

Additionally, the current $1,000 annual maximum IRA catch-up contribution for those 50 and older will be indexed for inflation starting in 2024. 

 

 

 

 

Theresa Marx is a senior wealth strategist for CIBC Private Wealth Management in Chicago, with over 20 years of industry experience. In this role, she is responsible for developing integrated wealth management solutions and providing comprehensive estate and financial planning services to high-net-worth clients.

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