Tax Planning for 2023

That’s right… 2023. You haven’t even prepared your taxes for 2022. Yet, this is the ideal time to begin developing your tax strategy for next year.
Tax planning is the method for analyzing your current financial situation and then establishing a strategy to reduce the amount of taxes you will pay the following year and beyond. The sooner you begin planning for 2023 and the more proactive you are, the more money you may save.
The initial factor to consider is how much money you believe you will earn in 2023, and in what tax bracket you will likely fall. Due to adjustments for inflation, the projected 2023 tax brackets will broaden, thus providing some inflation relief. Bloomberg, for example, forecasts the tax brackets for married persons filing jointly for 2023 will be:
10%: $0 to $22,000
12%: $22,000 to $89,450
22%: $89,450 to $190,750
24%: $190,750 to $364,200
32%: $364,200 to $462,500
35%: $462,500 to $693,750
37%: $693,750 and over.
Standard deductions are expected to increase to $27,700 in 2023, up from $25,900 for 2022. Thus, through planning, you may drop your tax obligation to a lower bracket, and determine whether you will be best served by taking the standard deduction or itemizing.
You also need to understand the difference between tax credits and tax deductions. Tax credits directly reduce the amount owed in taxes, while deductions lower how much of your income is subject to taxation at your highest bracket. Then, find and review all tax credits and deductions available for 2023 to find which ones you could potentially qualify for. The IRS provides a list. However, it frequently changes, thus making it wise to work with an alert tax professional.
You then need to determine how you are going to reduce your tax bill. This may include contributions to your 401(k), IRA, or charities.
Maintain records of all expenses. The IRS recommends keeping them for three years in case of an audit.
Because planning is an ongoing process, we recommend working with a tax professional whose services are available throughout the year, not just tax season. This will enable you to receive the advice and assistance you need to construct or revise your plan. We offer our clients unlimited complimentary tax planning advice throughout the year.
Professional Tax Services is a locally-owned provider serving over 3,500 local residents and businesses. For more information, call (661) 259-1967 or visit www.protaxservices.com.