Skip to content
a group of people sitting around a table

Personal Tax Guide: Year-End Planning Strategies for 2023

Nov 20, 2023

Receive the Tax Planning Guide coming March 2024.

Sign Up

Effective tax planning can accomplish much more than just saving income taxes for the current and future years. If done properly, effective tax planning can maximize the amount of funds you will have available for retirement, reduce the cost of financing your children’s education, reduce eventual estate taxes, and assist you in managing your cash flow to help you meet your financial objectives.

In some years your tax planning goals may include deferring some of your current year’s tax liability to a future year, thereby freeing up cash for investment, business, or personal use. This can be accomplished by timing when certain expenses are paid or controlling when income is recognized. Tax planning allows you to take advantage of tax rate differentials between years. However, if tax rates rise in a subsequent year, it might make sense to consider accelerating income into the current tax year. It is important to consider all facts and circumstances when doing tax planning.

Tax Planning Goals

Proper tax planning can achieve the following goals:

  • Reduce the current year’s tax liability.
  • Defer the current year’s tax liability to future years, thereby increasing availability of cash for investment, business, or personal needs.
  • Reduce any potential future years’ tax liabilities.
  • Maximize the tax savings from allowable deductions.
  • Minimize the effect of the AMT on this year’s tax liability.
  • Maximize tax savings by taking advantage of available tax credits.
  • Maximize the amount of wealth that stays in your family.
  • Minimize capital gains tax.
  • Minimize the Medicare Contribution Tax on net investment income.
  • Avoid or minimize any unfavorable tax results such as IRC Sec. 461(l) excess business loss limitations.
  • Avoid penalties for underpayment of estimated taxes.
  • Manage your cash flow by projecting when tax payments will be required.
  • Minimize potential future estate taxes to maximize the amount left to your beneficiaries and/or charities (rather than the government).
  • Maximize the amount of money you will have available to fund your children’s education as well as your retirement.

Tax Law Changes Impacting 2024 and Beyond

The Setting Every Community Up for Retirement Enhancement (“SECURE”) Act became effective on January 1, 2020 and repealed the maximum age for traditional IRA contributions for tax years 2020 and later. An individual at any age may contribute to a traditional IRA if compensation is received.

The SECURE Act increased the required minimum distribution (“RMD”) age from 70½ to 72 beginning in 2020 while the SECURE Act 2.0, which was signed into law on December 29, 2022, further increases the age to 73 for those that achieved the age of 72 on or after January 1, 2023 and will ultimately increase the age to 75 for those turning 73 on or after January 1, 2033 (discussed in greater detail below).

The SECURE ACT also established a ten-year distribution rule for non-spouse beneficiaries of participants or IRA owners whose death is after 2019.

The SECURE ACT made changes to IRC Sec. 529 plans to allow any unused funds after a beneficiary graduated to be used to repay student loans of the beneficiary plus his/her siblings up to $10,000 each. Additionally, it can also be used toward apprenticeship programs, private elementary and secondary school costs as well as home schooling and religious schools.

The SECURE ACT 2.0 allows, effective January 1, 2024, unused Sec. 529 funds to be transferred to a ROTH IRA with the following restrictions:

  • The account has been maintained for at least 15 years.
  • Contributions made to the Sec. 529 plan, including the associated earnings, are not eligible for a tax-free transfer until after five years.
  • The ROTH IRA must be that of the Sec. 529 account’s designated beneficiary.
  • While the aggregate transfer is limited to $35,000, the annual ROTH IRA contribution limit will still apply.

The SECURE ACT 2.0 also made the following changes that focused on helping to strengthen the retirement system including:

  • Effective January 1, 2023, the penalty for failing to take your RMD will be reduced to 25% from the previous 50% penalty. There is a provision where the penalty would be reduced to 10% if the RMD is withdrawn and a corrected tax return is submitted in a timely manner.
  • RMD requirements will no longer apply to Roth accounts in employer retirement plans effective January 1, 2024.
  • Higher catch-up contributions have been established including:
    • Effective January 1, 2025, individuals age 60-63 can make catch-up contributions of $10,000 to a workplace plan. This amount will be indexed annually for inflation.
    • Effective January 1, 2026, if your income is above $145,000, your catch- up contributions to a workplace plan (age 50 plus) must be made to a Roth account.
    • Beginning in 2024, the IRA catch-up amount for age 50 or older will be indexed annually for inflation.

Under current law, taxpayers aged 70½ or older can distribute from their pension plans up to $100,000 a year directly to a qualified charity with a qualified charitable distribution (“QCD”) and have it count towards their RMD. The SECURE Act 2.0 now provides for the $100,000 limit to be indexed annually for tax years after 2023.

The SECURE ACT 2.0 made a significant change to the qualified charitable distributions rules by allowing a donor age 70½ or older to transfer up to $50,000 from a traditional IRA to fund a charitable gift annuity or a charitable remainder trust.

An additional provision of the SECURE ACT 2.0 provides for employers to “match” employee student loan payments with matching payments to a retirement account, beginning in 2024.

The Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, enacted on March 27, 2020, resulted in changes including:

  • The RMD requirement was suspended due to the CARES Act but has been reinstated beginning on or after January 1, 2021. The distribution must be made by December 31 for those that turned age 72 by December 31, 2022. Under the SECURE Act 2.0, those who turned 72 after December 31, 2022, must start to withdraw annually starting the year they reach age 73. However, they have until April 1 of the year following the year they reach 73 to take the first RMD, which will result in two RMD distributions in that year, one for the year they reach 73, the other for the year they turn 74. See further details in the chapter on Retirement Plans.
  • Expanded Flexible Savings Account (“FSA”) flexibility and carryover provisions. One provision provides that employers can allow the carryover of unused FSA funds from one year to the next. If your company adopted these provisions, you can rollover $610 from 2023 to 2024.

The Consolidated Appropriations Act, 2021 (“CAA”), enacted December 27, 2020, included some of the following changes:

  • For tax years 2021 and 2022 only, business meals provided by a restaurant were fully deductible. Starting in 2023, all business-related restaurant meals will go back to the regular rate of 50% deductibility.
  • Extension of certain expiring provisions to December 31, 2025, including employer credit for paid family and medical leave, Work Opportunity Credit and special expensing rules for certain film, television, and live theatrical productions.

The American Rescue Plan Act of 2021 (“ARPA”), enacted March 11, 2021, resulted in changes including:

  • Student loan debt forgiveness is not taxable from 2021 through 2025.
  • Changes expanding the Earned Income Tax Credit for 2021 and future years including more workers and working families who also have investment income can get the credit. Starting in 2022, the limit on investment income is $10,300, indexed for inflation annually, and increased to $11,000 in 2023.

On August 16, 2022, Congress passed the Inflation Reduction Act (“IRA”) as part of efforts to lower the cost of living for American families and confront the climate crisis. Along with the passage of this act came several credits and rebates designed to promote clean energy.

  • The clean vehicles credit was enhanced and the rules related to the purchase of electric vehicles changed. For vehicles purchased and possession taken after August 16, 2022, the final assembly of the vehicles must occur in North America. For vehicles placed in service from January 1 to April 17, 2023, the base amount credit is $2,500 up to $7,500 total. Vehicles purchased after April 18, 2023 must meet new requirements to qualify for the credit, ranging from $3,750 up to $7,500.
  • The Energy Efficient Home Improvement Tax Credit was renewed and upgraded, allowing consumers to get 30% back for energy-saving renovations, up to $3,200 per year (up from the previous $1,200 maximum) if qualified energy-efficient improvements were made to your home after January 1, 2023. You can claim the credit on the improvement through December 31, 2032.
  • The “HOMES” (Homeowner Managing Energy Savings) Rebate program offers rebates up to $8,000 and the “High-Efficient Electric Home Rebate Act” offers rebates of $14,000 to qualified taxpayers. These rebates begin in 2023 and run until September 30, 2031.

As a result of the Tax Cuts and Jobs Act of 2017 (“TCJA”), the alternative minimum tax (“AMT”) has affected less taxpayers than in past years, so some of the tax strategies utilized in prior years will no longer be applicable. The key factors you should consider when identifying strategies to minimize your taxes are:

  • Prior to 2018, while residents of states with high income and property taxes (such as New York, California, Connecticut, Pennsylvania and New Jersey) were able to deduct the full amount of state income and property taxes against federal taxable income, they most likely did not receive a benefit if they were subject to the AMT. Beginning after December 31, 2017, state income and property tax deductions are limited to $10,000 and the deductions continue to be subject to the AMT. It is now less likely that the AMT will apply to many taxpayers. However, many states, including New York and California, now allow business entities to pay a state pass-through entity tax (“PTET”) to get around the $10,000 limitation. New York City also allows the PTET. For more details on PTET, see the discussion later in this chapter as well as the state tax issues chapter.
  • In addition to the limitations on state income and property taxes, miscellaneous itemized deductions such as investment expenses, unreimbursed business expenses, and professional fees are no longer deductible. Residents of New York will still be able to deduct real estate taxes and miscellaneous itemized deductions on their NYS income tax returns, though they may be limited based on their adjusted gross income (“AGI”). Also, exemptions are completely repealed and instead have been consolidated into the standard deduction.
  • The current top long-term capital gains tax rate is 20%. Including the additional 3.8% Medicare Contribution Tax on net investment income, the top federal long-term capital gains rate could be 23.8% and the top federal short-term capital gains tax rate could be as much as 40.8% in 2023 and 2024.
  • Under the TCJA, taxpayers may defer tax on prior short-term and/or long-term capital gains if the amount of the gain is invested in a qualified opportunity fund (“QOF”). Investors can reinvest their capital gains into areas that need investment (qualified opportunity zones or “QOZs”). Gains can come from any investment, whether that is from stocks, bonds, real estate, or partnership interests. To qualify for certain tax breaks, investors must invest their capital gains in a qualified opportunity fund within 180 days of realizing those gains. The money cannot be invested directly into a property, and funds must invest 90% of their capital into opportunity zone properties. For gains realized from flow-through entities, the date realized is deemed to be December 31 (or the year-end of the entity if a fiscal year). 

Note: Starting in 2021, if a gain invested in a QOF was excluded from federal gross income, the amount excluded will be added back to New York’s calculation of adjusted gross income.

  • Under current law, the complex netting rules have the potential effect of making your long-term capital gains subject to short-term rates, so you must carefully time your security trades to ensure that you receive the full benefit of the lowest capital gains tax rate.
  • Gift and estate taxes can reduce the amount your beneficiaries will receive by 40% to 50%, depending on which state you are a resident of at date of death. However, there are planning techniques and strategies available to maximize the amount of wealth that is preserved for your family. See the chapter on estate and gift tax planning for more information.

Tax Tip

1. Key Tax Planning Strategies


Planning idea

Your regular tax rate will be the same or lower next year and the AMT will not apply in either year.

  • Prepay deductions.
  • Defer income.

Your regular tax rate will increase next year and the AMT will not apply in either year.

  • Defer deductions.
  • Accelerate income, but only if the tax rate increase warrants accelerating tax payments.

The regular tax rate applies this year and is higher than the AMT rate that you expect will apply next year.

  • Consider bunching charitable contributions in the year with the higher tax rate (assuming you can itemize).
  • Defer income.

This year you are in the AMT and next year will be subject to a higher regular tax rate.

  • Consider bunching charitable contributions in the year with the higher tax rate (assuming you can itemize).
  • Accelerate income

You have net realized capital losses this year or loss carryforwards from last year.

  • Consider recognizing capital gains by selling appreciated securities to offset realized losses and loss carryforwards, thereby locking in the appreciation.

You have net realized capital gains this year.

  • Sell securities with unrealized losses to offset the gains (if market conditions justify it).
  • Use a bond swap to realize losses.
  • Consider tax implications of netting rules.
  • Avoid wash-sale rule.
  • Consider the implications of the Medicare Contribution Tax on net investment income.
  • Considering investing in a qualified opportunity fund.

You are contemplating purchasing new business equipment.

  • Accelerate the purchases into the current year to take advantage of IRC Sec. 179 deductions and bonus depreciation available in 2023 that can potentially allow you to expense the full amount of the equipment. Starting in 2023, the amount of bonus depreciation amount is 80% and decreases by 20% each year until it sunsets in 2027 (Qualified purchases must be placed in service in the current year.) The purchases should be deferred to the next year if you don’t think you can get the full benefit in the current year. The Sec. 179 limit was raised to $1,160,000 for 2023 and the total equipment purchase limit increased to $2,890,000.

A penalty for underpayment of estimated taxes will apply.

  • Withhold additional amounts of tax from your wages or bonus payments before December 31.
  • Prepay fourth quarter estimates due January 15 and increase the payment amount, if necessary.
  • Have withholding taken out of your retirement plan distribution.

You want to diversify a concentrated low basis stock position and avoid paying taxes currently.

  • Consider using a charitable remainder trust that will allow you to sell the stock in exchange for an annuity. This will allow you to defer the tax while benefiting a charity of your choice.

You have incentive stock options that you can exercise.

  • Consider exercising your options to start the long-term holding period, but only if the spread between the market price of the stock and the exercise price will not put you into the AMT.

Your passive activity losses exceed your passive income.

  • Dispose of an activity that is generating passive losses in order to deduct the suspended loss on that activity. However, consider the impact of the Medicare Contribution Tax on net investment income.

You would like to make significant charitable contributions.

  • Donate appreciated securities you have held for more than one year.
  • Consider establishing a charitable trust or a private foundation or take advantage of a donor-advised fund.
  • Consider donating partial interests in certain assets such as a conservation easement, remainder interest in real estate or artwork to a museum.

You need funds for personal use, such as improvements to your home in excess of the mortgage limitations or to pay tax liabilities.

  • Sell marketable securities with little or no appreciation to fund your needs, and then use margin debt to purchase replacement securities. The interest on the debt will be deductible, subject to investment interest limitations. The interest may also reduce the Medicare Contribution Tax on net investment income.
  • Take distributions, if available, from partnerships, limited liability companies, or S corporations on income that you have already paid taxes on. Be sure you have sufficient tax basis and are “at risk” in the entity.

You want to take advantage of the tax deferred nature of retirement accounts.

  • Maximize your contributions to your retirement accounts and take advantage of the best plans available to you prior to December 31.

You expect the value of your IRA to appreciate over time, and you want to position your IRA now so that there will be little or no tax impact when you or your beneficiaries take distributions later.

  • Consider converting your traditional IRA into a Roth IRA in the current year. This will cause a current tax liability, since the converted amount is subject to income tax in the year of the conversion. It is also important to consider state tax implications if you are considering moving to a lower taxing state.

You have a sizeable estate and want to protect your assets from estate tax.

  • For 2023, you can make gifts of $17,000 per individual. For 2024, you can make gifts of $ 18,000 per individual. These gifts are not subject to gift tax.
  • Pay beneficiaries’ tuition and medical expenses directly to the providers.
  • Use your cumulative basic exclusion amount (“BEA”) of $12.92 million for 2023. For 2024, the BEA increases to $13.61 million. For subsequent years, the exclusion will be indexed annually for inflation, using the chained Consumer Price Index (“CPI”).

You want to transfer assets to your designated beneficiaries during your lifetime.

  • Create a grantor retained annuity trust (“GRAT”).
  • Set up a family limited partnership (“FLP”) or family limited liability company (“FLLC”).
  • Make loans to your beneficiaries at minimum required interest rates. This may be less attractive now that interest rates have increased. The November 2023 rates are 5.30% for loans up to three years, 4.69% for loans between three years and nine years and 4.83% for loans longer than nine years. Please note that the rates change monthly.

You want to provide for your children’s and/or grandchildren’s qualified education costs.

  • Establish and fund an IRC Sec. 529 plan that can grow tax-free as long as you use the funds to pay qualified education expenses. For 2024, you can prepay up to $ 90,000 (or $ 180,000 if gift splitting) without incurring a gift tax. For 2023, the amounts that you can pay without incurring a gift tax are $85,000/$170,000.
  • Prepay college or private school tuition gift-tax-free by making payments directly to the educational institution.
  • Plan beneficiaries of Sec. 529 accounts who have remaining funds in the account can roll up to $35,000 into a Roth IRA as long as the account has been open at least 15 years.

Year-End Tax Planning Tips

Tax Tip 1 provides a snapshot of key strategies geared toward helping you achieve your planning goals. It includes ideas to help you reduce your current year’s tax as well as any potential future taxes. While this chart is not all-inclusive, it is a good starting point to help you identify planning ideas that might apply to your situation. Keep in mind that many of the strategies involve knowing what your approximate income, expenses and tax rates will be for the current and subsequent years and then applying the applicable tax law for each year to determine the best path to follow. Implementation of many of these ideas requires a thorough knowledge of tax laws, thoughtful planning and timely action.

Timing when you pay deductible expenses and when you receive income (to the extent you have control) can reduce your taxes. Timing expenses and income can also defer some of your tax liability to next year (or even later years) giving you, rather than the government, use of your money.

To gain the maximum benefit, you need to project, as best you can, your tax situation for the current and subsequent years. This will help you identify your tax bracket for each year. Your year-to-date realized long-and short-term capital gains and losses should be included in your projections. Be sure to consider prior year loss carryforwards (if any). Based on these results, you can decide what steps to take prior to year-end. You will be able to decide whether you should prepay deductions and defer income, defer expenses and accelerate income, realize capital losses, or lock in capital gains.

In some situations, a taxpayer who expects to be taxed at a higher rate in the following year should plan to accelerate income and defer deductions. Some of the situations are:

  • A preferential filing status of head-of-household or surviving spouse will end after the current year.
  • The taxpayer is single in the current year but will be married in the following year and therefore may be subject to the marriage penalty.
  • The taxpayer was unemployed or a student for a majority of the current year but expects to be employed in the following year.

    Tax rates are adjusted for inflation and the incremental increase from 2023 to 2024 to the highest tax bracket is almost double that of prior-year increases. In this situation, a taxpayer may find themselves in a lower tax bracket in the following year and should plan to defer income and accelerate deductions:

    • A preferential filing status of head-of-household or surviving spouse will be available in the following year.
    • The taxpayer is married in the current year and subject to the marriage penalty but will be divorced in the following year.
    • The taxpayer is employed during the current year but expects to retire in the following year.

      Tax Tip 2 offers basic guidance for deciding when to prepay or defer deductible expenses and when to defer or collect taxable income.

      Tax Tip 3 offers steps to follow relating to realized capital gains and/or losses, and the type of gains and losses you should trigger.

      Tax Tip 4 shows the benefit of bunching charitable contribution deductions in one year, even when the standard deduction applies in subsequent years. 

      Tax Tip

      2. AMT Tax Planning Strategies


      You will not be in the AMT this year or next year and next year’s tax rate

      You are in the AMT*

      Nature of deduction or income

      will be the same as the current year or will decrease

      will increase

      only this year

      this year and next year

      only next year

      Charitable contributions, mortgage interest, investment interest and self-employed expenses






      Income such as bonuses, self-employed consulting fees, retirement plan distributions, and net short-term capital gains (unless you have long-term losses offsetting the gains)






      Legend = Prepay before the end of the current year/Defer into next year or later/Collect before the end of the year.

      *The chart assumes your regular tax rate on ordinary income is higher than the maximum AMT tax rate of 28%. 

      Expenses You Can Prepay

      Here are the most common deductible expenses you can easily prepay by December 31, if appropriate: 

      Charitable Contributions

      Prior to 2020, individual itemizers were allowed to deduct up to 60% of their AGI for cash donations to qualified charities. For 2020 and 2021, the AGI ceiling was revised to allow taxpayers to deduct up to 100% of AGI for qualified cash contributions, which are defined as cash contributions to public charities, and certain private foundations. Cash contributions to donor-advised funds in 2020 and 2021 were capped at 60% of AGI. This increase was not extended to 2022 or beyond. Non-cash contributions (such as clothing and household goods) to qualifying organizations continue to be capped at 50% of AGI while contributions of appreciated capital gain property are capped at 30% of AGI. Be sure to carefully work through the calculations, as gifting different types of property to charities with varying exempt status (such as private foundations or public charities) can limit the amount of the deduction allowed in a particular year.

      State and Local Income Taxes and Property Taxes

      A taxpayer may claim an itemized deduction of up to $10,000 ($5,000 for married filing separately) for the aggregate of (1) state and local income taxes and (2) state and local property taxes paid.

      Miscellaneous Itemized Deductions

      All miscellaneous itemized deductions that were subject to the limitation of 2% of AGI were suspended until tax years beginning after December 31, 2025.

      Mortgage Interest

      Before the end of the year, consider prepaying your mortgage payment for next January in the current year to accelerate the deduction.

      Margin Interest

      Be sure to pay any margin interest, since interest accrued at year-end is only deductible if actually paid. This may also reduce the Medicare Contribution Tax on net investment income.

      Business Equipment

      Be sure to accelerate the purchases of business equipment to take advantage of expensing allowances, subject to certain limitations. To qualify, the property must be placed in service in the year of the intended deduction. TCJA expanded the deduction to 100% for qualified property placed in service by December 31, 2022 with the amount dropping by 20% beginning in 2023 until bonus depreciation sunsets in 2027.

      Tax Tip

      3. Year-End Capital Gains and Losses

      If you have

      Consider taking these steps

      Both short-term and long-term losses

      Sell securities to recognize unrealized gains, preferably if held short-term, up to the amount of your losses, less $3,000.

      Long-term gains in excess of short-term losses

      Take losses equal to the net gain, plus $3,000. Use long-term loss positions first, then short-term loss positions.

      Both short-term and long-term gains, or short-term gains in excess of long-term losses

      Take losses equal to the net gain, plus $3,000. Use long-term loss positions first to gain the benefit of offsetting short-term gains (taxed at a rate as high as 37% in 2023 plus 3.8% Medicare Contribution Tax on net investment income).

      Worthless securities and bad debts

      Identify these securities and debts and take the necessary steps so that the losses are deductible in the current year by having the proper substantiation.

      Note: If you are married filing separately, substitute $1,500 for $3,000 in the above tip. 

      Income You Can Accelerate or Defer

      Timing income can be more difficult than timing deductions, but here are some types of income that you may be able to control the timing of receipt so you can gain the advantage of having the income taxed in a year that you are in a lower tax bracket.

      Cash Salaries or Bonuses

      If you anticipate your current year’s income tax rate to be lower than next year’s rate, you can accelerate salary or bonuses into the current year. You would need to determine if there are strict limitations on amounts that can be accelerated. However, if next year’s rate is lower than your current year’s rate, it may make sense to defer such income until next year provided the income is not constructively received (made available to you in the current year). 

      Consulting or Other Self-Employment Income

      If you are a cash-basis business and you anticipate your current year’s tax rate to be lower than next year’s rate, you can accelerate income into the current year. Otherwise, you would want to defer such income.

      Retirement Plan Distributions

      If you are over age 59½ and your tax rate is low this year, you may consider taking a taxable distribution from your retirement plan even if it is not required or consider a Roth IRA conversion. For tax year 2023, individuals of at least age 70½ are allowed to make tax-free distributions of up to $100,000 from individual retirement accounts directly to public charities. Starting in 2024, as a provision in the SECURE Act 2.0, this amount will be indexed annually for inflation. This allows an individual to exclude the distribution from income, thereby reducing your state income taxes in states that limit or disallow the charitable contribution deduction.

      The SECURE Act, which was signed into law on December 20, 2019, changed the timing by which you must withdrawal your first required minimum distribution (“RMD”). If your 70th birthday is July 1, 2019, or later, you are not required to take the first distribution from the retirement accounts until you reach age 72. The SECURE 2.0 Act further adjusted the ages when the RMD must commence. If you turn 72 after December 31, 2022, you are not required to take the first RMD until you turn age 73. See the Retirement Plan chapter for further information.

      Retirement Plan Contributions and Deductible IRA Contributions

      Adjust the timing of deductible pension plan or IRA contributions to reduce income in a year when you expect your tax rate to be higher.

      Health Savings Accounts

      Consider which year to make deductible health savings account contributions.

      Capital Gains

      The following ideas can lower your taxes this year:

      • If you have unrealized net short-term capital gains, consider selling the positions and realize the gains in the current year if you expect next year’s tax rate to be higher. Only consider this strategy if you do not otherwise intend to hold the position for more than 12 months, making it eligible for the long-term capital gain rate of 20%, exclusive of the additional Medicare Contribution Tax. However, you may be able to apply the netting rule which may result in the offsetting of long-term losses to short-term gains, resulting in a tax savings of 37% in 2024 rather than 20%.
      • Considering investing in a qualified opportunity fund.
      • Review your portfolio to determine if you have any securities that you may be able to claim as worthless, thereby giving you a capital loss before the end of the year. A similar rule applies to bad debts.
      • Avoid wash sales. Loss recognition is disallowed if the same or substantially identical security is purchased 30 days before or after the sale of the security that created the loss.
      • Consider a bond swap to realize losses in your bond portfolio. This swap allows you to purchase similar bonds and avoid the wash-sale rule while maintaining your overall bond positions.
      • Similarly, you may consider selling securities this year to realize long-term capital gains that may be taxed at the more favorable rate this year, and then buying them back to effectively gain a step-up in basis. Since the sales are at a gain, the wash-sale rules do not apply.

      Real Estate and Other Non-Publicly Traded Property Sales

      If you are selling real estate or other non-publicly traded property at a gain, you would normally structure the terms of the arrangement so that most of the payments would be due next year. You can use the installment sale method to report the income. This would allow you to recognize only a portion of the taxable gain in the current year to the extent of the payments you received, thereby allowing you to defer much of that tax to future years. 

      U.S. Treasury Bill Income

      If you have U.S. Treasury Bills maturing early next year, you may want to sell these bills to recognize income in the current year if you expect to be in a lower tax bracket this year than next year.

      Installment Sale Income

      Consider the timing of installment sales and the recognition of income currently if a lower tax bracket is expected.

      Sale of Principal Residence

      Determine which year would be most beneficial to sell your principal residence and claim the $500,000 exclusion (if you are filing joint returns). The exclusion for other taxpayers is $250,000. See chapter on principal residence sale and rental for more details.

      Wash sales and constructive sales

      Generate wash sales and/or constructive sales to adjust realized gains and losses to a more beneficial year. See chapter on capital gains and dividend income for further information.

      Bunching Deductions 

      Medical Expenses

      The Consolidated Appropriations Act, 2021 provided that unreimbursed medical expenses are permanently deductible to the extent they exceed 7.5% of AGI. Therefore, bunching unreimbursed medical expenses into a single year could result in a tax benefit. Medical expenses include health insurance and dental care. If you are paying a private nurse or a nursing home for a parent or other relative, you can take these expenses on your tax return even if you do not claim the parent or relative as your dependent, assuming you meet certain eligibility requirements.

      If you’re self-employed and have a net profit for the year, you may be eligible for the self-employed health insurance deduction. This is an adjustment to income, rather than an itemized deduction, for premiums you paid on a health insurance policy covering medical care, including a qualified long-term care insurance policy for yourself, your spouse, and dependents. The policy can also cover your child who is under the age of 27 at the end of 2024, even if the child wasn’t your dependent.

      Charitable Contributions

      As a result of the TCJA, many itemized deductions have been eliminated or limited. The deduction for the charitable contribution is the exception, as it has virtually been untouched by the TCJA. However, the CARES Act has altered charitable contributions. See chapter on charitable contributions. At the same time, the standard deduction has increased substantially. An individual can deduct the larger of either his/her standard deduction or itemized deductions. Thus, to maximize the deduction for charitable contributions, it might be best to bunch gifts to charities in one year, so the individual’s charitable contributions exceed the standard deduction amounts, and he/she will be able to itemize. Similarly, funding a donor-advised fund, private foundation or charitable trust in a particular year may be effective in maximizing the tax benefit of such charitable deductions.

      Tax Tip 4 shows the potential benefits of bunching charitable deductions.

      Adjust Year-End Withholding or Make Estimated Tax Payments

      If you expect to be subject to an underpayment penalty for failure to pay your current-year tax liability on a timely basis, consider increasing your withholding and/or make an estimated tax payment between now and the end of the year to eliminate or minimize the amount of the penalty.

      Utilize Business Losses or Take Tax-Free Distributions

      It may be possible to deduct losses that would other­wise be limited by your tax basis or the “at risk” rules. You may also be able to take tax-free distributions from a partnership, limited liability company (“LLC”) or S corporation if you have tax basis in the entity and have already been taxed on the income. If there is a basis limitation, consider contributing capital to the entity or making a loan under certain conditions.

      Passive Losses

      If you have passive losses from a business in which you do not materially participate that are in excess of your income from these types of activities, consider disposing of the activity. The tax savings can be significant since all losses become deductible when you dispose of the activity. Even if there is a gain on the disposition, you can receive the benefit of having the long-term capital gain taxed at 23.8% (28.8% if the gain is subject to depreciation recapture) with all the previously suspended losses offsetting ordinary income at a potential tax benefit of 40.8% in 2024, inclusive of the Medicare Contribution Tax.

      Incentive Stock Options

      Review your incentive stock option (“ISO”) plans prior to year-end. A poorly timed exercise of ISOs can be very costly since the spread between the fair market value of the stock and your exercise price is a tax preference item for AMT purposes. If you are in the AMT, you will have to pay a tax on that spread, generally at 28%. If you expect to be in the AMT this year but do not project to be next year, you should defer the exercise. Conversely, if you are not in the AMT this year, you should consider accelerating the exercise of the options; however, keep in mind to not exercise so much as to be subject to the AMT.

      Estate Planning

      If you have not already done so, consider making your annual exclusion gifts to your beneficiaries before the end of the year. For 2023, you are allowed to make tax-free gifts of up to $17,000 per year, per individual ($34,000 if you are married and use a gift-splitting election, or $ 17,000 from each spouse if the gift is funded from his and her own separate accounts). For  2024, you can make a tax-free gift of up to $18,000 per individual, or $ 36,000 if you are gift-splitting with your spouse. By making these gifts, you can transfer substantial amounts out of your estate without using any of your basic exclusion amount (“BEA”). Also, try to make these gifts early in the year to transfer that year’s appreciation out of your estate.

      Furthermore, because of the increased cumulative BEA in 2023, you were allowed to make additional gifts to fully utilize such exclusion of $12.92 million ($25.84 million for married couples). For 2024, these amounts will increase to $13.61 million ($27.22 for married couples). The BEA has doubled as a result of the TCJA; however, it will sunset at the end of 2025, reverting back to the maximum BEA in effect before the TCJA became law, which was $5 million, adjusted for inflation. When combined with other estate and gift planning techniques, you may mitigate estate and gift taxes and transfer a great deal of wealth to other family members (who may be in a lower income tax bracket or may need financial assistance).

      Note: The amount of the lifetime gift exclusion will be adjusted annually for the chained consumer price index (“CPI”). 

      Tax Tip

      4. Benefits of Bunching Charitable Contribution Deductions

      Sam and Sally incur $10,000 in real estate taxes annually and make charitable contributions of approximately $30,000 in cash per year to public charities. Over a five-year period, charitable contributions would total $150,000 and deductible real estate taxes would total $50,000 ($10,000 maximum each year for five years). Total itemized deductions would be $200,000.

      Bunching all $150,000 charitable contributions in 2024 will result in total itemized deductions over the five-year period of $276,000. The entire amount of the charitable contributions is deductible as it meets the appropriate AGI limitations.

      By implementing this bunching strategy, Sam and Sally will yield a federal after-tax benefit of up to $ 28,120 over five years, which is $ 76,000 in additional deductions at a top federal rate of 37%. In effect, for married taxpayers with only taxes and charitable contributions, this strategy can yield $15,200 of additional deductions for each year applied.

      CONTRIBUTE $30,000 TO CHARITY ANNUALLY (in thousands)








      Charitable Deduction







      Real Estate Taxes







      Standard Deduction














      FRONTLOAD $150,000 CHARITABLE CONTRIBUTION IN 2023 (in thousands)








      Charitable Deduction







      Real Estate Taxes







      Standard Deduction















      Note: For purposes of this illustration, we are assuming the same standard deduction amount for each year. In reality, the standard deduction is adjusted yearly for the CPI. The 2024 standard deduction for married filing jointly is $29,200. 

      Tax Strategies for Business Owners

      Timing of Income and Deductions

      If you are a cash-basis business and expect your current year’s tax rate to be higher than next year’s rate, you can delay billing until January of next year for services already performed to take advantage of the lower tax rate next year. Similarly, even if you expect next year’s rate to be the same as this year’s rate, you should still delay billing until after year-end to defer the tax to next year. You also have the option to prepay or defer paying business expenses to realize the deduction in the year that you expect to be subject to the higher tax rate. This can be particularly significant if you are considering purchasing (and placing in service) business equipment. If you are concerned about your cash flow and want to accelerate your deductions, you can charge the purchases on the company’s credit card. This will allow you to take the deduction in the current year when the charge is made, even though you may not actually pay the outstanding credit card bill until after December 31.

      Business Equipment

      For 2023, the IRS Sec. 179 deduction is capped at $1,160,000 and is phased out at $2,890,000. Bonus depreciation was increased to 100% for property placed in service after September 27, 2017 until December 31, 2022. As mentioned earlier, the bonus percentage will decrease by 20% each year starting 2023 until it sunsets in 2027. The TCJA expands the definition of qualified property to include used property, provided that the taxpayer did not use the property prior to the purchase.

      Note: Under the TCJA, some businesses may not be eligible for bonus depreciation. For example, bonus depreciation is not allowed for certain real estate businesses with average annual gross receipts of more than $25 million for the prior three years, subject to inflation adjustment, that elect to deduct 100% of their business interest expenses.

      Note: The bonus depreciation is an addback on most state returns while IRC Sec. 179 expense is only a partial addback.

      Note: Some states may not allow bonus depreciation. 

      Business Interest

      If you have debt that can be traced to your business expenditures – including debt used to finance the capital requirements of a partnership, S corporation or LLC involved in a trade or business in which you materially participate – you can deduct the interest “above-the-line” as business interest rather than as an itemized deduction. The interest is a direct reduction of the income from the business. This allows you to deduct all of your business interest, even if you are a resident of a state that limits or disallows all of your itemized deductions.

      Business interest also includes finance charges on items that you purchase for your business (as an owner) using the company’s credit card. These purchases are treated as additional loans to the business, subject to tracing rules that allow you to deduct the portion of the finance charges that relate to the business items purchased. Credit card purchases made before year-end and paid for in the following year are allowable deductions in the current year for cash basis businesses.

      Note: Interest expense deduction is limited to 30% of adjusted taxable income (“ATI”). Beginning in 2022, depreciation, amortization and depletion are no longer added back in the calculation of ATI. Such limitation does not apply to:

      • Businesses with gross receipts that do not exceed $ 29 million for 2023.
      • Electing real property trade or business.

      Note: Disallowed business interest deduction is carried over to the next year subject to that year’s limitation. 

      Qualified Business Income Deduction

      Qualified business income (“QBI”) is generally defined as net income and deductions that are effectively connected to a U.S. business. Through 2025, the TCJA provides an IRC Sec. 199A deduction for sole proprietors and owners of pass-through entities of a “qualified” business generally equal to 20% of qualified business income, subject to various loss and deduction limitations. Though this deduction is not allowed in calculating the owner’s AGI, it does reduce the taxable income. 

      Excess Business Losses (“EBL”) and Net Operating Losses (“NOL”)

      Excess losses from all of your trades or businesses for 2023 are limited to $ 578,000 (married filing jointly) and $ 289,000 (all others). Any losses above these amounts will be carried forward as an NOL. NOLs arising in tax years ending after 2020 can only be carried forward. NOLs cannot be carried back and can offset up to 80% of taxable income in future years with any excess to be carried forward indefinitely.

      Note: The CARES Act removed the limitation on excess business losses for taxpayers other than corporations for tax years beginning after December 31, 2017 and before January 2, 2021. It modified the loss limitation for non-corporate taxpayers so they can deduct excess business losses arising in 2018, 2019 and 2020. In the event such losses were not fully utilized in the year they arose, the CARES Act allows non-corporate taxpayers to carryback such losses five years unless an election is made to forego the carryback. The NOL limitation of 80% of taxable income had also been temporarily suspended. All limitations related to EBL and NOL will resume for years beginning after 2020 and before 2026. 

      Research and Development (“R&D”) Capitalization

      Effective January 1, 2022, R&D expenditures under IRC Sec. 174 are required to be capitalized as opposed to expensed. The option to deduct the full expense in the year incurred has been eliminated by TCJA. Expenditures for research conducted in the U.S. are amortized over five years. If the research is conducted outside the U.S., the expenditures are amortized over 15 years. For more information, please see the chapter on tax credits.

      Pass-Through Entity Tax

      The TCJA limited the itemized deduction of state income and real estate tax deduction to $10,000. Since then, states have explored ways for a workaround and came up with the pass-through entity tax (“PTET”). In November 2020, the IRS issued guidance to allow state tax deductions at the pass-through entity level. The PTET is an “optional” state income tax payment subject to timely annual election. It allows the entity to pay state tax and take the payments as a deduction to offset the business’ gross income without limitation at the federal level thereby reducing the partners’ allocated income from the entity. In general, each partner and shareholder of the pass-through entities that paid the PTET will receive a credit against their state individual income tax liability. However, some states may not allow the payments as a credit but instead will allow the deduction to offset their distributive share of income from their state adjusted gross income in determining their state income tax liability. For tax years beginning on or after January 1, 2022, New York City partnerships or S corporations that have elected to participate in the New York State PTET may annually elect to participate in the New York City PTET. Partners, members, or shareholders who are subject to the New York City personal income tax may be eligible for a NYC PTET credit against New York City personal income taxes on their New York State income tax returns. For more information, see the chapter on state tax issues.

      Note: Depending on the state, the PTET tax could be an addback to a state’s adjusted gross income in determining their state income tax liability.

      Sign up to receive the Tax Planning Guide available in 2024.

      Receive the latest business insights, analysis, and perspectives from EisnerAmper professionals.