As the year-end approaches, now is an ideal time to review strategic planning opportunities and preview what lies ahead in 2023. We encourage you to discuss these planning topics with your Sand Hill Wealth Manager.

Retirement Planning

• In 2023, retirement plan contributions for 401(k)s, 403(b)s, and most 457 plans will increase to $22,500 with an additional catch-up contribution limit of $7,500 for participants aged 50 and older. As a reminder, the 2022 limits are $20,500 plus the catch-up contribution limit of $6,500 for those aged 50 and older.
• IRA contribution limits will increase in 2023 to $6,500 (up from $6,000 in 2022), plus another $1,000 for individuals aged 50 and older.
• The Social Security Administration announced the 2023 payments will increase by 8.7%. Additionally, Social Security payroll tax will apply to earnings up to $160,200, up from $147,000 in 2022.
• Confirm with your tax advisor or Wealth Manager that you have completed any Required Minimum Distributions from your retirement accounts before year end.
• If you inherited an IRA in 2020 or 2021, be sure to discuss the current status of the IRS’s guidance on the SECURE Act interpretation with your Sand Hill Wealth Manager.
• Consider establishing a Roth IRA for children or grandchildren who have earned income. Gifting cash to fund a Roth IRA can be a powerful wealth-transfer planning tool, especially in years when children are subject to low-income tax rates.
• If applicable, review the Net Unrealized Appreciation strategy with your Wealth Manager. This strategy allows you to take employer stock from tax-deferred accounts and benefit from capital gains tax rules.

Charitable and Personal Gifting Considerations

• In 2023, the federal lifetime exclusion amount will increase to $12.92 million per person or $25.84 million per married couple. As a reminder, per the Tax Cuts and Jobs Act (TCJA) of 2017, the exclusion amount reverts to pre-Act limits at the end of 2025, adjusted for inflation.
• The federal annual gift tax exclusion will increase to $17,000 per person in 2023, up from $16,000 in 2022.
• If you are at least age 70 ½, you can donate up to $100,000 each year from your IRA directly to qualified charities using a qualified charitable distribution.
• Consider establishing a Donor Advised Fund and funding it with low cost securities for maximum tax efficiency.

Tax Updates

• For Federal income tax brackets in 2023, the top marginal tax rate of 37% will apply to individual income above $578,125 and couples that are married filing jointly with income above $693,750. This is a 7% increase in income thresholds from 2022.
• The standard deduction will increase to $27,700 for married filing jointly and $13,850 for individuals.
• Sand Hill has been actively harvesting losses this year where appropriate in your investment portfolio. This information can be shared with your tax advisor to assist with any year-end tax planning exercises.
• Accelerate deductions at year-end: If you anticipate being in a lower tax bracket in 2023, consider paying your January mortgage payment in December as well as your property taxes before year-end. Be sure to check with your tax advisor to confirm if this makes sense for your specific tax situation, especially if you may be subject to the Alternative Minimum Tax (AMT).
• Review if there is interest in taking advantage of clean energy tax credits. Currently there is an increased availability of Residential Clean Energy tax credits and Electric Vehicle tax credits.

Other Planning Considerations

• Review if your estate plan is up to date, including a will, revocable living trust, health care directive and financial power of attorney.
• The maximum contribution to a Flexible Spending Account will increase in 2023 to $3,050 from $2,850.
• Health Savings Account contributions for 2023: if you qualify, you can contribute up to $3,850 for individuals, or $7,750 per family, plus an additional $1,000 catch-up if you are age 55 or older.
• Review if there have been any changes to your portfolio preferences, risk tolerance or investment objectives and update your Sand Hill Wealth Manager as appropriate.
• Review your beneficiary designations on all retirement accounts, insurance policies, deferred compensation plans, and transfer on death (TOD) designations.

Sources: Internal Revenue Service, Social Security Administration