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A truly unprecedented year
With inflation reaching levels that many have never seen before and some companies losing 75% of their values, this year has been unprecedented. For some, this year has been as complicated as learning a new dance. Did you leverage the job market to get a new job or were you laid off due to the economy? That’s one step. Did you retire? There’s another step. Did you have to “unretire”? There’s a twirl. Given all the possible things that could have happened to you over this year, you may want to review your finances before this year ends and 2023 begins. Proving that you have all the right moves in 2022 might put you in a better position to tango with 2023.
This is an excellent time to have a reality check, take inventory and see where you can improve your overall personal finances.
Time to do some tax planning
The end of the year has some important tax deadlines to note. And given the year of 2022 and all that has gone on, there are some opportunities you need to have on your radar.
. Do you engage in Tax-loss harvesting? Unfortunately, this year might mean you have some losers in your portfolio. Tax-loss harvesting is the practice of taking capital losses (selling securities for less than what you first paid for them) to manage capital gains. This might be a move you want to consider. Make sure you chat with your tax advisor or financial team first to understand how this works.
. One step further… Consider that up to $3,000 of capital losses in excess of capital gains can be deducted from ordinary income, and any remaining capital losses above that amount can be carried forward to offset capital gains in upcoming years.
. Do You Want To Itemize Deductions? This might be the year you decide to itemize deductions. With inflation at high levels, it has pushed the 2023 standard deduction and tax brackets higher. This might give you the opportunity to bunch deductions in 2022 and consider taking the standard deduction in 2023. The standard deduction for 2022 for a single filer is $12,950 and a Married filing Jointly filer is $25,900. These levels rise in 2023 to $13,850 and $27,700, respectively. If you think it might be better for you to itemize, now would be a good time to gather the receipts and assorted paperwork. This is where a proactive tax team can be very useful.
. Are You Thinking Of Gifting? As referenced in our November article, how about donating to a qualified charity or non-profit organization before 2022 ends? Your gift may qualify as a tax deduction. For some gifts, you may be required to itemize deductions using Schedule A.
How about an estate plan checkup?
Estate planning doesn’t have to be complicated and there are many folks that miss the simple stuff. Specifically, take a look at your beneficiary designations. If you haven’t reviewed these designations for some time, double check to see that these assets are structured to go where you want them to go in the event that you pass away. If you’ve made a transition in 2022, such as made Florida your resident state, it might be a good idea to ensure you have the documents up-to-date.
Assess your priorities
Financial planning is understanding what your financial goals are. The end of the year is a fantastic time to assess your 2023 goals financially and get the right tools lined up to make sure you can implement. However, it’s not all about the money! Make sure you take the time to assess your non-financial priorities. Is 2023 going to be the time where you spend more time with your family? When you start a business? Or when you finally train for and run that marathon? Plan now so you’re ready to go in the new year.
Don’t ignore the financial housekeeping
It’s easy to always plan for the big things, but don’t ignore the simple moves.
. Check on the amount you have withheld. If you discover that you have withheld too little on your W-4 form so far, you may need to adjust this withholding before the year ends.
. Review all of your subscriptions. The average US Household has 9 paid subscriptions. Do you need them? Do you even know about them?
. Update and change your passwords. Cyber security is crucial these days and a simple step of updating your passwords can keep you safe.
What Can You Do Before Ringing In The New Year?
New Year’s Eve may put you in a dancing mood, eager to say goodbye to the old year and welcome 2023. Before you put on your dancing shoes, though, consider speaking with a financial or tax professional. Do it now, rather than in February or March. Small end-of-year moves might help you improve your short-term and long-term financial situation. We at Wealthquest would welcome the opportunity to help you celebrate the end of the year and prepare for the new one. Feel free to always reach out to Adam Day, aday@wqcorp.com.
Have a very happy holiday season!
For informational purposes only. Not intended as investment advice or a recommendation of any particular security or strategy. Not legal or tax advice. Opinions expressed in this commentary reflect subjective judgments of the author based on conditions at the time of writing and are subject to change without notice. Wealthquest Corporation is an SEC registered investment adviser with its principal place of business in the State of Ohio.
Registration does not imply a certain level of skill or training. For more information about Wealthquest, including our Form ADV Part 2A Brochure, please visit https://adviserinfo.sec.gov/ or contact us at 513-530-9700.
808 Wiggins Pass Road,Suite 200
Naples, FL 34110
(513) 530-9700 | wqcorp.com
