“Taxes? I'll show you taxes!”

I was raised by two CPAs. It is probably not a surprise that taxes would come up in their conversations from time to time. However, it was a surprise the day when their 4 year old angrily shouted from the back seat, “Taxes? I’ll show you taxes!”  Apparently, my first understanding of taxes came from the 1973 animated movie Robinhood. You were not going to get taxes from me without a fight! This has been an inside joke in my family ever since. 

As we head toward the tax deadline in April, I think back to the tax collector in that movie. He shows up every year. It’s inescapable. But does that mean we can’t try to mitigate what we owe? Here are 5 tips to consider for 2023:

1. It’s not too late: You are eligible to make prior year contributions to your IRA, Roth IRA, or HSA until the tax deadline in April.  If you have a SEP IRA, you have until the tax deadline plus extensions.
2. Pre-tax contributions: Pre-tax contributions to a 401(k), IRA, or eligible HSA will reduce your income by the amount contributed.
3. Think long term: Do you want to lock in your current tax rate? Consider Roth contributions or a Roth conversion. 
4. Qualified Charitable Distribution (QCD): If you are charitably inclined and over age 70 ½, consider gifting from your IRA directly to an eligible charity.  The amount gifted isn’t included in income (better than a deduction) and can count towards satisfying your Required Minimum Distribution (RMD). 
5. Donor Advised Fund: If you are charitably inclined, giving appreciated securities to a Donor Advised Fund saves you the taxes owed on the capital gains. Charitable lumping, or giving multiple years worth of donations at once, can allow you an income deduction too (if greater than the standard deduction).  Once funded, you direct which charities to gift to and when. The tax benefits from this strategy happen in the year of the initial donation to the fund and typically involve securities from a taxable brokerage account.