Keystone Global Partners

Forward-Thinking Wealth Management For Tech Founder

Year-End Tax Planning 2023

Year-End Tax Planning Strategy for 2023

As we approach the end of the year, it’s important to consider various strategies to optimize your tax situation. Below, we outline some of the more common tax items we review with our clients during their year-end tax planning meetings. Please note that this is not a comprehensive list. These considerations pertain to federal tax law only, and do not encompass state or municipal laws. We recommend discussing the items below with your tax advisor before taking action. There may be other more substantial tax strategies based on your individual situation.

Tax Projections and Income Planning

  • Collaborate with your financial and tax advisor to develop preliminary tax projections and pro forma tax analyses.
  • Assess whether it’s advantageous to accelerate or defer income and expenses based on the tax analysis.
  • Review whether adjustments to tax withholding or estimated payments are necessary.
  • Examine tax brackets to determine if you or your family members can benefit from the 0% or 15% Long-Term Capital Gains rates or lower brackets.

Review Investment Gains and Losses / Harvest Losses or Gains

  • Evaluate realized and unrealized gains/losses to identify tax loss or tax gain harvesting opportunities.
  • If needed, sell securities by year-end to realize capital gains or losses.
  • Note that the deadline to “double up” a position to avoid a wash sale is November 28, 2023.

Charitable and Family Gifts

  • Complete any charitable gifts by year-end. Keep in mind that your deduction may be limited by your AGI. Consider donating appreciated long-term stock instead of cash.
  • To control charitable deduction timing, consider using a Donor-Advised Fund or foundation instead of an outright gift.
  • Determine whether bunching donations makes sense if you are close to itemizing.
  • Finalize gifts to family members or individuals by year-end. The annual gift tax exclusion for each individual is $17,000 for 2023. Married couples can double this amount given via gift-splitting.
  • Consider whether qualified charitable distributions are suitable if you are 70 ½ or older.

Maximize Retirement Contributions

  • Make the maximum allowable contributions to your employer retirement accounts.
  • Fund and convert your Backdoor Roth contributions before year-end to align with the associated tax year. For IRA contributions, note that the deadline is April 15, 2024.

Education Savings

  • Evaluate the possibility of creating or adding funds to education savings accounts. Assess whether super funding vs. annual gifting makes sense.

FSA or HSA Contributions

  • Consider contributing to a Flexible Spending Account (FSA) or Health Savings Account (HSA) during your employer’s annual benefits enrollment period.
  • Consider using HSA for long-term investing.

Stock Options Evaluation

  • For individuals with company-granted stock options, assess whether it’s the right time to exercise or disqualify them.

Avoid the Following:

  • Avoid purchasing new mutual funds with expected large year-end capital gains distributions.
  • Be mindful of wash sale rules during tax-loss or tax-gain harvesting.

2025 Wealth Transfer Considerations:

  • Explore opportunities for long-term tax minimization. The estate tax rate is 40% on assets above the lifetime exemption amounts, which currently stand at $12.92 million per person ($25.84 million for married couples). This exemption may decrease to approximately $6.5 million per person ($13 million per married couple) on January 1, 2026, unless Congress takes action before that date. For families with substantial wealth, various advanced gifting strategies can be considered using irrevocable trusts.

Please don’t hesitate to reach out if you have any questions.

-Keystone Global Partners

 

The information and opinions provided in this material are for general informational purposes only and should not be considered as tax, financial, investment, or legal advice. The information is not intended to replace professional advice from qualified professionals in your jurisdiction.

Tax laws and regulations are complex and subject to change, and their application can vary widely based on the specific facts and circumstances involved. Any tax information or advice in this article is not intended to be, and should not be, used as a substitute for specific tax advice from a qualified tax professional.

Investment advice in this article is based on the general principles of finance and investing and may not be suitable for all individuals or circumstances. Investments can go up or down in value, and there is always the potential of losing money when you invest. Before making any investment decisions, you should consult with a qualified financial professional who is familiar with your individual financial situation, objectives, and risk tolerance.

What types of clients do you specialize in?

Our Wealth Management clients consist of founders, entrepreneurs, and their families.

Will you help me solve any and all financial problems I may encounter?

We function as your personal Chief Financial Officer (CFO), and it's highly probable that we've assisted others in resolving comparable issues, many times over. Examples include business exit strategy, QSBS optimization, tax reduction, estate planning, exit planning for company founders, alternative investments, 401(k) plans, IRS audits, family transitions, disability, real estate, debt management, social security, Medicare, health insurance, family office structure, college funding, gifting, and a wide range of other financial concerns.

What services do you provide?

Our primary areas of focus include proactive and ongoing tax minimization, advanced financial planning, and sophisticated investment management.

How do you help clients implement their financial plans?

We firmly believe that even the best advanced financial plan is of little value until it’s implemented. To help you achieve your goals without feeling stressed or overwhelmed by the noise along the way, we will work together to make the necessary decisions; then, we will take care of the execution.

Are your recommendations truly in my best interest?

As an SEC Registered Investment Advisory firm, we are held to a fiduciary standard, which legally requires us to do what is in our clients’ best interests. This differs drastically from some of our competitors. Our commitment to an honest and ethical culture has allowed us to build deep, trusted relationships with our clients.

What are all the different ways you are compensated?

We are only compensated via one management fee. We believe this allows us to have an unbiased framework to select the best investments for you and to give you advice tailored to your needs, not ours. We believe compensation drives behavior, and the way someone is paid influences the work they do. Many financial firms have complex fee arrangements; we do not.

Why would I choose you as my financial advisor and not DIY?

There’s certainly a possibility that if you put enough focus and energy into it, you could do it all yourself. But like everyone else, your time is limited, and most people prefer to focus on family or business. We’re here to free up your time while leveraging our wealth of experience in addressing concerns, presenting solutions, and working toward your financial goals.

What are the benefits of working with an independent financial advisor compared to a bank or large advisory firm?

Our independent and conflict-free approach allows us to find the best solutions for our clients. This gives you the advantage since larger firms might be compelled to make specific recommendations, sell proprietary products, or may be restricted in the advice and services they offer. We offer guidance customized to your needs and goals which is a personalized level of service, care, and attention larger firms just can’t provide.

Do you use proprietary funds?

At Keystone, we do not use proprietary products. We do not receive commissions or backend fees from any third parties. We do not earn compensation for recommending one fund vs. another. We believe this allows us to have the most unbiased framework to select the best investments for you and to provide advice tailored to your needs, not ours.

Where do you keep my money and how can I see it?

For your convenience and safety, we use Charles Schwab as the custodian for the majority of our client assets. Schwab administers more than $7 trillion dollars and we selected them to care for yours as well based on a variety of criteria including safety of assets, financial strength, and ease of use. As custodian, Schwab holds your funds and provides direct reporting to you. Your funds will be held in accounts under your name and can be viewed anytime online at Schwab.