December 2022 – By Ryan Boyle, CFP®, CRPC®
2022 is finally coming to an end, and 2023 is going to bring on quite a few changes. We have a few tips to help prepare for these changes, and a few tips to help get 2023 started on the right track.
Review the tax changes
From increases in contribution limits to increases in brackets, 2023 is expected to have lots of adjustments. To get started on the updates, the IRS has increased the standard deduction amounts to $13,850 for single filers, $27,700 for those filing married filing jointly, and $20,800 for the head of household filers. While the amounts included in each of the brackets are increasing, the rates taxed in each bracket will remain the same. For those who enjoy gifting to their loved ones, the IRS is providing an increase of $1,000 to the annual gift exclusion, bringing the new total to $17,000 for gifts made. The last point I would like to include would be the increase in the estate tax exclusion, as this amount has increased from $12.06 million to $12.92 million per person.
Update your tax withholdings and review your current budget
Inflation was a common headline throughout 2022, and as a result, some of you may have gotten a larger-than-expected raise. If you did receive a sizable raise, you may want to consider modifying your withholding through your employer to ensure your tax return meets your expectations or to allow you to contribute more towards your retirement savings, as the amounts individuals can defer have also increased. The IRS has posted a tax withholding estimator on their site, and once 2023 arrives you may want to check in to see if any changes are needed for your withholding. Reviewing your annual budget could be another starting point for your new year, as individuals who make quarterly tax payments may need a higher amount to pay, the funds could go towards your goals, or you could have a larger savings pool for the year.
Make any IRA contributions that you may have missed
While you can make your 2023 contributions starting as of January 1st, you have up until you file your taxes to make your contributions for 2022. For 2023, the maximum contribution you are allowed to contribute has been changed from $6,000 to $6,500 with no changes to the $1,000 catch-up amount allowed for individuals over age 50. Along with the contribution increases, the phase-out limits have increased for the deductibility of traditional IRA contributions, Roth IRA contributions, and nondeductible traditional IRA contributions.
Tax laws and rules can change any year, and for those who are outside of the personal finance realm, this could be cumbersome and difficult to follow. At Vantage, we are here to help you navigate this constantly changing environment and ensure your overall plan can weather any storm the world throws in its direction. If you would like to know more about the upcoming changes and how they will impact your financial plan, please reach out to your wealth advisor to discuss their impact on your overall plan.
This material is for informational purposes only. It is not a recommendation or solicitation to buy or sell any securities. Vantage Financial is not a tax advisor; please consult your tax advisor prior to making any investment decisions. Vantage Financial is an Investment Advisory Firm registered with the Securities and Exchange Commission (“SEC”). SEC registration does not imply any particular level of skill or expertise.