With the end of the year coming to a close, we now have to prepare for the new year. That means to create or review what your goals are, review your strategies, assess how you did this year, what changes you can make for the new year, and so on. Whether you had a good year or a bad year, you should try to make it a habit to take the time and check on yourself and your progress. This is a first start to preparing for next year.
Review how much taxes you paid
One thing I always do right before the new year is look at how much taxes I paid. I’ve taken on a goal to try to break even when it comes to tax time. I don’t want to owe the government money and I don’t want the government refunding me money. I’ll look at my final earnings statement and see how much taxes I paid, project what my tax liability is going to be (if any), and adjust my tax exemptions.
Review financial impacts from your goals
Year after year, I had to always pay taxes because I didn’t pay enough throughout the year. This year I became aggressive and started paying additional taxes every paycheck. What I didn’t predict was purchasing a hybrid which came with federal tax incentives ($7500). I had to immediately adjust my tax exemptions at the rate I was paying additional federal taxes, I wouldn’t be able to benefit the tax credit.
If you have a goal like this that you know has a financial impact, whether good or bad, make the appropriate adjustments.
Review your financial portfolio
Are you investing your money in sectors that you’re comfortable with? Do you have a diverse portfolio? Do you have a goal for next year and your investment portfolio isn’t aligned with it? Take the time to review your portfolio and make sure where you invest your money are in places that make you comfortable.
Review new laws
New laws are constantly being passed, federal, state, or local laws. There are laws that can impact you and your finances directly or indirectly. Here are a few that I’ve been keeping track of
- Required Minimum Distribution age was increased to 72
- Incentives for EV and solar technology
- 401K contributions was increased to $22,500. Catch up contributions for ages 50 and over will increase to $7500.
Cost of Living Adjustment (COLA) increases
Tax brackets for 2023
New tax brackets were released from the IRS. Keep an eye on what your projected tax bracket could be. If you are on the borderline between two tax brackets, make adjustments to try to get to the lower bracket.
- 37% for incomes over $578,125 ($693,750 for married couples filing jointly).
- 35% for incomes over $231,250 ($462,500 for married couples filing jointly);
- 32% for incomes over $182,100 ($364,200 for married couples filing jointly);
- 24% for incomes over $95,375 ($190,750 for married couples filing jointly);
- 22% for incomes over $44,725 ($89,450 for married couples filing jointly);
- 12% for incomes over $11,000 ($22,000 for married couples filing jointly).
There’s so much to be aware of when it comes to a new year. Changes to tax laws, contributions limits, tax incentives, and other financial interests are important to know and plan ahead of time. Preparing for the next year and making appropriate adjustments are good to do each year. If you are interested in following my journey, email subscribe to get alerts of latest posts or follow me on Facebook, Instagram, and Pinterest.
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