As the tax code changes from year to year, there’s nothing “routine” about maximizing your tax deductions and credits. Some of those changes raise or lower deductible amounts. Others introduce new tax benefits or fade old ones out completely. Recently, the IRS even warned that refunds will likely be smaller this year.

Still, if you’re using a personal finance management tool like Quicken, you’ll be ahead of the game as we enter the final stretch of 2023. Your finances are already organized, and your tax reports are ready to print or email to your accountant with a few simple clicks.

That’s an important step in taking control of your tax deductions and credits and getting ready for tax season. However, if you want to maximize your refund for 2023 (or at least minimize your obligation), here’s a checklist of last-minute deductions and tax-planning items to consider before the end of the year.

1. Maximize your 401(k)—it’s not as simple as you might think

If you have only one retirement plan through one employer, then the 2023 tax rules and limits for your 401(k), 403(b), or SARSEP IRA are fairly straightforward:

  1. Maximum elective deferral: $22,500
  2. Catch-up contributions: $7,500
  3. Overall contribution limit: $66,000 ($73,500 with catch-up contributions)

Note, by the way, that the rules for a SIMPLE 401(k) are similar but lower.

So, what do the rules mean?

The maximum elective deferral is the maximum amount you can contribute from your salary to these specific kinds of retirement plans in 2023.

The catch-up contributions allow people who are at least 50 years old by the end of 2023 to contribute that much extra for the year.

The overall contribution limit is the total that a single employer (or “related employers”) can add to your accounts in 2023, including both your contributions and theirs. It’s a bit more complex than that, but that’s the gist of it.

Again, if you only have one employer and one plan, these rules are straightforward enough. It’s when you have more than one plan, and/or more than one employer, that things get more complicated.

Do you get a credit, too?

Yes, if you are married and make under $73,000 or single and make under $36,500, your contribution gets you a retirement savings contribution credit of up to 50% of the amount contributed. 

What if your plan has a lower limit than these?

Some plans do. The rules listed above are IRS limits, not guarantees. You’ll have to talk to your own plan representative to figure out what you can or can’t do in your specific plan.

However, if your current plan is more limited than the IRS max, you can start your own individual IRA or ROTH IRA to make up the difference. A professional financial advisor can walk you through your options.

What if you have more than one plan?

As a general rule, your maximum elective deferral applies as a total across all your plans. Once you’ve contributed your max for the year, that’s it. You can’t start over in a different plan and contribute again. So make sure you’re “spending” those contributions wisely.

For example, if you have a 401(k) through your employer and also a personal IRA, and if your employer matches your contributions up to a certain amount, take full advantage of that first. Make sure you get every matching dollar you can get from your employer before contributing to your own account.

Your catch-up contributions work basically the same way, but the IRS examples showcase an interesting possibility. If you have two different plans, and neither one of those plans allows catch-up contributions, you can still reach your catch-up max by using both.

For example, let’s say plan A and plan B each let you contribute up to your maximum elective deferral amount, but they don’t allow any extra for your catch-up contributions. No problem. Contribute your maximum elective deferral amount to whichever one has a better matching plan. Then, contribute your catch-up contribution amount to the other one.

In other words, don’t get too hung up on the names. It’s the total amount you can contribute that matters, and you can split that total amount among different plans. Just be sure to compare your various plan benefits before deciding how to allocate your contributions.

What if you have more than one employer (including your own business)?

If you have more than one employer, especially if one of those employers is your own business, then the overall contribution limits come into play. In fact, the IRS examples highlight the possibility of using your own company to take advantage of those much higher limits.

Of course, having your own business doesn’t change the maximum elective deferral rule. That maximum still applies across all your plans, even your plan under your own company. Once you’ve contributed your own personal max from your salary, you’re done.

However, overall contribution limits are much higher and apply to individual employers, not to individual people.

Here’s why that matters. Imagine business-savvy Jane. She’s 48. Her maximum elective deferral is $22,500 for 2023. She has a 401(k) through her employer, and she has already contributed her max for the year through that plan. She’s too young for catch-up contributions, so she’s done.

Or is she?

Let’s say Jane also owns a company to manage her rental property investments. Even if she starts a retirement plan through the company, she can’t contribute any more deferred salary as an individual taxpayer. That maximum elective deferral applies to Jane personally.

However, under the IRS rules, Jane’s company hasn’t contributed anything yet toward the company’s overall contribution limit.

For 2023, Jane’s company can contribute the full $66,000 to a retirement plan for Jane. It doesn’t even have to subtract the $22,500 she contributed through her employer’s 401(k), because that was an entirely different company.

Again, maximum elective deferrals apply to individual people, but overall contribution limits apply to individual (and related) companies.

The bottom line: if you have your own company, make sure you’re taking advantage of it. Talk to a financial advisor who specializes in complex wealth management—one who’s familiar with all the tax deductions and credits available through personal business entities.

2. Consider itemized deductions

Ever since the Tax Cuts and Jobs Act of 2017, which increased the standard deductions dramatically for both single and married tax filers, the vast majority of Americans have been claiming the standard deduction every year.

That doesn’t mean it’s always the best thing to do. It just means most people do it. After all, claiming the standard deduction is easier than figuring out your itemized deductions—unless you’ve been categorizing your expenses all year and can generate a Schedule A report of itemized deductions with a few clicks.

Once you have your itemized total, compare that total against your 2023 standard deduction to see at a glance which is best:

  • Single, or married filing separately: $13,850
  • Head of household: $20,800
  • Married, filing jointly: $27,700

Additional deduction if you’re 65 or over, or blind

If you’re at least 65 years old or blind, the 2023 standard deductions are a bit higher:

  • Single or head of household, add $1,850 to the standard deduction
  • Married, filing separately or jointly, add $1,500 per qualifying individual

If you’re at least 65 years old and blind, the standard deductions are higher still:

  • Single or head of household, add $3,700 to the standard deduction
  • Married, filing separately or jointly, add $3,000 per qualifying individual

If you refinanced your house, deduct those points

The term “points” is used to describe certain charges paid to obtain a home mortgage. Points may also be called loan origination fees, maximum loan charges, loan discount, or discount points. Points are prepaid interest and may be deductible as home mortgage interest if you itemize deductions on Schedule A (Form 1040), Itemized Deductions. If you can deduct all of the interest on your mortgage, you may be able to deduct all of the points paid on the mortgage.  

If it’s close, consider a staggered approach

If you’re near the break-point, consider an alternate-year approach to any itemized deductions you can control. For example, you could double your charitable donations one year, then skip them the following year. In the years when you make those donations, choose to itemize. In the alternate years, choose the standard deduction.

3. Make charitable donations

If you are claiming itemized deductions for 2023, get those charitable donations in before the end of the year, but there are a few tax code limitations to be aware of.

Cash donations to qualifying charitable organizations made in 2023 are 100% deductible in most cases. However, if the amount you contribute is more than 60% of your total income, then certain limitations apply.

One strategy to consider is the donation of appreciated stocks or real estate. When you donate appreciated property, you avoid paying capital gains tax and get to deduct the full fair value of the property donated. This is a win-win.

Another strategy to consider is qualified charitable distribution (QCD) from your retirement IRA. When done properly, while you will not receive a tax deduction for the contribution, you will not need to pay tax, even though IRA distributions are normally taxable.

Finally, remember to get records and receipts for any donation you intend to claim. If you’re using Quicken, attach each record and receipt digitally to its underlying donation transaction so you won’t have to dig around for it when you need it.

4. Accelerate other expenses (but think about AMT & SALT)

In the same way that you can accelerate charitable donations into 2023 by making them in December or delay them into 2024 by making them in January, you can pay upcoming property taxes or state income taxes early or late to flip between years too.

Here, though, the rules are further complicated by AMT and SALT.

What is AMT and why does it matter?

The Alternative Minimum Tax (AMT) limits the tax breaks that people with “high economic income” can claim by setting a minimum bar for their tax liability.

Still, it’s not a set number; it’s a calculated amount. Some deductions are allowed under the AMT calculation, but state, local, property, and sales taxes are not.

As a result, there’s no point in accelerating these expenses into 2023 if you’ll be paying the alternative minimum tax liability. You would just lose the benefits. In that case, you’re better off delaying those tax breaks until 2024.

What is SALT and why does it matter?

The Tax Cut and Jobs Act of 2017 imposed a $10,000 cap on the federal income tax deduction for state and local tax payments (ergo, SALT). This limitation creates another potential reason why you wouldn’t want to accelerate those payments into 2023 — if paying in 2023 would result in breaking the cap, you’d lose the tax benefit.

Still, if you own a pass-through business, some states have created a workaround that lets you pay some of that tax through the pass-through entity to lower your state tax liability. It isn’t always the best option, but it’s something you’ll want to ask your tax advisor about if you’re likely to hit the SALT limit.

5. Take advantage of HSA & Flexible Spending Accounts

If your health plan qualifies for a health savings account (HSA), you can deduct up to $3,850 in contributions to your HSA in 2023 for an individual plan, or up to $7,750 for a family plan. If you’re 55 or older, you can add another $1,000 to that limit. It’s not too late to make those contributions for 2023.

For a flexible spending account (FSA), the end-of-year concern revolves around spending, not saving. Most FSA contributions don’t roll over to the following year, so if you don’t spend the money in time, you’ll lose it.

The IRS does, however, allow FSA plans to allow up to $610 to roll over to the next year or to implement a grace period so you can spend the money later—potentially as late as March 15, 2024. So before you scramble to find a last-minute dentist appointment, check the rules of your specific FSA.

6. Defer income to next year

The more you make in 2023, the higher your starting point when it comes to calculating your 2023 tax liability. For many taxpayers, there’s not much you can do about when you get paid, beyond maybe asking your employer to delay your bonus check until January.

However, if you’re a business owner or freelancer, you might consider delaying invoices for payments you don’t need right away until the clock turns over to 2024. Still, that’s only going to add to your starting point in 2024, so make that decision carefully, based on all your other tax factors.

7. Sell winning or losing stock, depending on your strategy

If your income was relatively low this year, it might be a good time to sell that appreciated stock you’ve been thinking about trading.

On the other side of that coin, you can also sell off your depreciated holdings before the end of the year to get a tax break from the losses (“lost harvesting”). If your losses outweigh your gains, you can claim up to $3,000 of that excess capital loss to offset your ordinary income and even carry excess losses into the future to offset future income.

8. Hold off on mutual fund or share purchases

Before you pick up a mutual fund or new shares right before year-end, think about what any end-of-year distributions or dividends would do to your 2023 taxes.

It’s always a good idea to consult a financial advisor before making any significant buy or sell decisions, but the months approaching the end of the calendar year are especially important — both in wrapping up the year for your 2023 taxes and in planning ahead for 2024.

9. Take any minimum required retirement distributions

If you have an IRA and you’ve reached the age of 73 (or 72 if you got there before December 31, 2022), you have to start taking minimum distributions by April 1 of the next year.

After that first year, the cutoff date for subsequent distributions is December 31, so if you defer your first one using the April 1 grace period, you’ll need to take a second one by December 31 of that same year.

If you reach age 72 in 2022, you must take your first RMD by April 1, 2023, and the second RMD by Dec. 31, 2023. If you reach age 72 in 2023, your first RMD for 2024 (the year you reach 73) is due by April 1, 2025.

The distribution rule was suspended in 2020, but it’s back in effect with hefty penalties for failing to take the required distributions.

What kinds of retirement plans do these rules apply to?

The IRS lists the following types of accounts for the minimum distribution rule:

  • traditional IRAs
  • SEP IRAs
  • SIMPLE IRAs
  • 401(k) plans
  • 403(b) plans
  • 457(b) plans
  • profit-sharing plans
  • other defined contribution plans

Employer sponsored retirement plan account owners can delay taking their RMDs until the year in which they retire, unless they’re a 5% owner of the business sponsoring the plan. These rules do not apply to IRA accounts. 

How much is the minimum distribution?

Unfortunately, like so much else about the IRS tax code, the answer is complicated. It changes based on your balance at the end of the previous year, and your minimum distribution is calculated each year using a distribution period that’s based on your age.

You can find the detailed rules on the IRS website, but working with professional financial and tax advisors is strongly recommended.

What’s the penalty for failing to take a distribution?

If you don’t take the full minimum required distribution, you’ll be charged a 25% excise tax on whatever you didn’t take that you should have. So be sure to take those required distributions on time, and remember that you’ll either need to withhold tax when you take that distribution or pay estimated tax instead.

Tips to make complicated tax planning a lot easier

Want to make all your end-of-year tax planning easier? Here are a few tips for an end-of-year routine:

Tip 1: Consult a tax professional

As your finances grow more complex, it’s a good idea to develop an ongoing relationship with a tax professional and consult with them at least once per quarter. If you stay on top of your categorization in Quicken, you can run all the reports you need, making the process much more efficient.

Tip 2: Run expense reports & tax schedule reports

Even working with a tax professional, you’ll still need to fill out a comprehensive tax planner at the end of the year. That can be painful if your finances are scattered across 12 months of statements from your bank, credit cards, mortgage company, and so on. Quicken Classic’s built-in tax schedule reports and Quicken Simplifi’s customizable expense reports put the information you need at your fingertips.

Tip 3: Review your transactions throughout the year

Make a habit of logging into Quicken once a week to categorize transactions while they’re still fresh in your mind. If you have too many transactions each week to review them all, choose a reasonable threshold and review every transaction above that amount.

Tip 4: Review your tax transcript at IRS.gov

Finally, it’s a good practice to obtain all of the information in your IRS file to ensure you’re not missing anything. Once the IRS has processed the information provided from third parties, you can view the information in your “wage and income” transcript to ensure you’re on top of everything that should be reported.