We are hopeful you all have a wonderful Thanksgiving with family and friends! We are so thankful for your continued business and referrals!
Our offices will be closed Thursday and Friday but we wanted to share a few important updates for you to "chew" on while enjoying your turkey!
| |
Tax Planning for 2023 (and beyond)
As we approach year end, we'd like to remind everyone of a few common tax planning strategies to minimize taxes in 2023 (or future years). Please reach out if you would like to discuss any of these more.
Loss Harvesting
- If 2023 has been good to you and you anticipate having net capital gains from your trading activity on securities (stocks/bonds/digital assets), work with your financial advisor to sell ("harvest") poor performing investments before year end so that those losses can help offset the taxable gains you have. Two watch-outs
- Be aware of wash sale rules which prevent you from repurchasing substantially similiar securities within 30 days;
- Keep in mind that if your losses exceed your gains, you are limited to a maximum $3,000 net capital loss deduction on your tax return (and any excess loss carries forward to future years)
Roth Conversions
- If you have made traditional IRA contributions, you will evenutally pay tax on these amounts and any earnings on them when you take withdrawals. If you are currently in a tax bracket that is lower than what you anticpate being in down the road, it is wise to convert some funds from a tradtional IRA to a Roth IRA. Although this will become a taxable withdrawal this year, you are taking advantage of the lower tax rates now as well as allowing the investment to grow tax free as earnings on a Roth are NOT taxable (whereas earnings on a traditional IRA are taxable).
Charitable Giving
- If you are charitably minded, keep in mind that IF you itemize, charitable contributions (cash and non-cash) can help you save taxes. The tax savings will depend on the marginal tax rate you are in as well as how far over the standard deduction you are without charitable contributions. If you don't itemize, you may still get a marginal benefit on CO returns if you give more than $500. We are not suggesting you only donate if it has a tax benefit to you but the tax benefit is certainly another advantage as you consider if and how much to donate to causes important to you.
TCJA Sunset
- We will cover this topic in more depth in a future newsletter but just a heads up on the Tax Cut and Jobs Act (TCJA) that was passed in 2017. Although there is no guarantee what Congress will agree to these days, right now the major provisioins of TCJA will expire at the end of 2025. As a general rule, most of the TCJA provisions resulted in lower taxes to individuals. Here are a few examples
- Income tax brackets - individuall income tax rates will revert back to 2017 levels which in most cases were higher than they are under TCJA (the current 12% tax bracket becomes 15%, 22% becomes 25%, 24% become 28%, 32% become 33% and 37% become 39.6%) ;
- The QBI deduction (which allows business owners to reduce taxable business income by 20%) goes away;
- Pre TCJA, the standard deduction was $6,500 for single filers and $13,000 if married. These amounts are inflation adjusted each year but essentailly doubled with TCJA. For 2023, the standard deduction is $13,850 for single filers and $27,700 for married filers.
- Bottom line, although the most common tax strategy is to always defer income and accelerate deductions, given the impacts of the potental TCJA sunset, there is an argument to flip that approach in tax years 2023-2025 in order to minimize the adverse effect of higher tax taxes after 2025.
The link below contains some key facts about 2023 federal income tax rates that we think you will find helpful. Our thanks to our payroll partner (ADP) for sharing this.
| | |
Social Security Updates
For those currently employed:
-
The annual wage limit subject to the 6.2% FICA tax has increased to $168,600 for 2024 wages (up from $160,200 for a 5.2% increase)
For those receiving SS benefits:
-
The annual COLA (cost of living adjustment) has been set at 3.2%. As a result, your SS benefits will increase by this % starting January, 2024.
-
For those that started receving SS benefits before their full retirement age(FRA), the maximum amount you can earn without any reduction in your SS benefit increased to $22,320 (from $21,240 for a 5% increase). If 2024 is the year you reach FRA, then the maximum amount you can earn increased from $56,520 to $59,520.
- Following a decline in 2023, the monthly base Part B medicare premium (for doctor's services and non-hospital care) will increase to $174.70 (from $164.90 in 2023)
- The MAGI thresholds that will cause an increase in the base Part B premiums have also increased. The first increase occurs when MAGI exceeds $103,000 for individuals and $206,000 for married couples (up from $97,000 and $194,000, respectively, in 2023). The button below will take you to useful article with more details on Medicare premiums.
| | | |
CO Minimum Wage
-
Although not official on the DOL website yet, the state minimum wage for CO is expected to increase from $13.65 to $14.42 (a 5.6% increase) on January 1st.
-
The minimum wage for tipped employees will also increase from $10.63 to $11.40 (a 7.2% increase).
Denver Minimum Wage
-
Given the number of clients that operate in Denver, please note the minimum wage in Denver will increase to $18.29 from $17.29 (a 5.8% increase)
-
For tipped employees, the Denver minimum wage will increase to $15.27 from $14.27 (a 7.0% increase)
| New CO Unemployment Website |
The State of CO implemented a new website for employers to report unemployment wages, track claims made against them and file appeals.
Although this new site is a step in the right direction, the launch and implementation of it had several issues. At this point, all employers should be registered on/using the new site but if you are still having issues please reach out and we can assist.
| | |
|
TABOR and Prop HH - What's Next??
- Propositon HH (which could have impacted how TABOR worked this year) was defeated in the Nov 7th election. Although Governor Polis ordered a special session to continue discussing how to remedy the escalating property tax situation in CO, it is unlikley any of these will impact TABOR.
- As a result, based upon what we know right now, the TABOR refunds will follow the "normal" refund mechanism.
- As a reminder, the "normal" mechanism pays the TABOR refund via the CO income tax return and is a graduated amount based upon your AGI. The higher your AGI, the higher your TABOR refund.
- The additional TABOR refunds received in 2022 ($750 if single, $1,500 if married) were not normal. Those payments were above and beyond the "normal" TABOR refund since the State of CO had so much excess revenue for the 2021/22 fiscal year (which ended June 30th, 2022).
- Although the TABOR refund is expected to be higher for the 2022/23 fiscal year, do not expect a seperate TABOR check this year. The higher TABOR refund will either add to the refund you are getting from CO or reduce the amount of tax you owe CO for 2023.
| | |
We LOVE small businesses!! Did you know they account for 99% of all business entities in CO and just under 50% of private sector employment in the state? Needless to say, they play a vital role in the economic health of CO and the nation at large. This Saturday (November 25th) is Small Business Saturday so please get out and show your support as well as the rest of the year!
| | | | |