OUT WITH THE OLD AND IN WITH THE NEW

Important 2022 Year-End Tax Reminders and 2023 Updates

As we wrap up a challenging 2022, the team at CSG Capital Partners is reflecting on the past year while simultaneously looking ahead to 2023 with cautious optimism. As Thomas Jefferson once profoundly stated, “I like the dreams of the future better than the history of the past.”

While the current year brought global strife, extraordinary inflation, and a borderline recession, remember that in the midst of chaos, there is also opportunity. This inflationary environment has presented some openings and positive outcomes not to be overlooked when considering current year and next year’s taxes.

Here are a few tax-related ideas worth exploring before bidding 2022 adieu:

• Tax-Loss Harvesting - Ensure that you have taken advantage of tax-loss harvesting in your taxable investment accounts. With the markets (both stock and bond) pulling back significantly, you may have losses that can be recognized to offset gains, significantly decreasing current and future capital gains obligations. Your CSG team is doing this for your Janney accounts, but many accounts at other firms are unfortunately neglected. Let’s review any funds that may benefit from this activity.
• Roth IRA Conversions – It may be a good year to consider converting some Traditional IRA funds to Roth funds. This will increase your taxable income for the year in which it is done but can help save significantly in the future. It is often a great longer-term estate planning strategy.
• Take Advantage of all Tax-Deferral Opportunities - Ensure that you have maximized tax-deferred contributions to your employer sponsored plans, IRAs, Healthcare Spending Accounts, and Flexible Spending Accounts.
• Utilize Charitable Giving Strategies – You can gift highly appreciated stock to a charity of your choice or direct your unneeded Required Minimum Distributions (RMDs) towards a charitable organization. Both strategies can minimize your taxes, as well as provide a maximum benefit to the receiving organization.

Find other year-end tax strategies for 2022 in this article written by one of Janney’s Tax and Estate Planning specialists, Jack Cintorino.

Things to consider as we look forward to 2023 and beyond:

Each year, the IRS redefines the limits it sets out for individuals, business, and retirement plans. While the increased cost of goods and services has diminished purchasing power for everyday items, it has also been responsible for some very historic increases in 2023 and beyond that will benefit most everyone. 

For starters, those receiving social security benefits should see their monthly income increase at a record rate of 8.7%, starting in January. That is on top of an annual increase of 5.9% from 2021 to 2022. As the IRS limits come into focus for the upcoming year, this year’s inflationary environment will contribute to significant increases in contribution limits and tax rates, amongst other things.

On that note, the IRS has also announced projected changes for 2023 to their employer-sponsored retirement plan contribution limits. Individuals over the age of 50 can contribute up to $30K, while those under the age of 50 can contribute up to $22,500. In addition, changes to tax brackets and limits in 2023 should benefit many, with some of those important changes highlighted below:

• The standard deduction has increased to $13,850 for individuals and $27,700 married filing jointly.
• 2023 marginal estimated tax rates have favorably changed. See link to 2023 numbers below.
• The maximum contribution for a family to a Health Savings in 2023 account increased to $7,750 from $7,300 with the catch-up contributions for those over 55 still at $1,000
• Individuals will be able to transfer up to $12.92 million tax-free to their descendants, up from just over $12 million in 2022. A married couple can pass on double that amount. And the annual exclusion for gifts increases to $17,000 next year.

You can find a comprehensive list of the pending 2023 updates to IRS limits here (updated as accurately as possible based on what we know now).

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In addition to the typical year-end and upcoming year considerations, several recent pieces of legislation are worth noting. While complex in nature, the following articles should help to outline the key points that may affect you directly.

• The SECURE Act of 2020 - Understanding the SECURE Act Basics | Titan
• The Inflation Reduction Act (2022) - Here’s What’s In The Inflation Reduction Act – Forbes Advisor

We hope that you will find these resources helpful in discussions with your tax advisors, as well as in discussions with your advisors here at Janney with CSG Capital Partners.