by Taylor J. Kovar – CEO / Founder, Kovar Wealth Management

 

–Hey Taylor – In the midst of all the holiday madness, I’m trying to get a head start on tax prep stuff for next year. Any tips for how to make the whole process go more smoothly? Specifically what I should get done before 2023 ends?

 

–Hey Hannah – Your future self will be very happy with you for getting an early jump on your taxes. Even if you don’t have to move money around before 2023 ends, being a little extra prepared makes filing easier and can save you a whole lot of money. Three main things to think about as you prepare:

 

  1. Annual contributions. As a financial advisor, this is the first thing I encourage people to think about. Have you maxed out contributions on your retirement accounts for the year? On top of growing your wealth for retirement, you also want to take care of those tax-free contributions. Whether it’s your employee-sponsored 401(k) or your IRA, you want to be all caught up before the year ends. While you’re at it, think about any other investments you’ve made that might allow you to lower your taxable income for 2023.
  2. Consider your filing status. This is something that people don’t think about until they’re already filing, but it’s really helpful to do ahead of time. The standard deduction for a single person is $13,850, and $27,700 for a married couple filing jointly. In the race to get your returns finished before April, that standard deduction might look extra appealing and keep you from tallying up all your potential write-offs. If you start thinking about it before it’s time to file, you might discover that you, or you and your spouse, have lots of and lots of worthy deductions that could save you more than the standard deduction. Think about all those little things—the business meals, the home office, the cell phone and internet bills—that you could classify as business expenses. They probably add up to more than you expect, and you could end up getting a good chunk of money back on your return if you itemize all of it.
  3. Look at your medical expenses. Here is another deductible expense that people often overlook. You can’t write off every doctor’s visit, but you can deduct medical and dental expenses that exceed 7.5% of your adjusted gross income. If you had a big surgery or a lot of hospital visits with co-pays, you might be able to knock a few thousand dollars off your tax bill. It’ll be a lot easier to itemize those expenses if you start now, especially if you end up back in the doctor’s office in January and lose track of which visits happened when.

 

Making deductible contributions is a good way to close out the year, but I think the most important part of tax prep is getting all your ducks in a row. If you can use your downtime to itemize everything, you’ll be able to make a difference on those tax returns. Good luck, Hannah!