Act now to lower your tax bill
It’s not too late to lower your 2023 taxes. Consider taking one or more of these five actions before the April filing date:
1. Contribute to IRAs – You can make contributions to your IRAs for the 2023 tax year, up until the deadline for filing your return (usually April 15), not including extensions.
2. Distribute trust income – Trustees and executors have until March 5, 2024, to distribute income to beneficiaries and have those distributions treated as if they were made in 2023.
3. Invest in a QOF to defer qualified gains – Under special Qualified Opportunity Zone Fund (QOF) rules regarding short- or long-term capital gains:
a. You may have 180 days from the date of realization to invest the gains in a QOF and defer (perhaps for several years) payment of taxes that would otherwise be due
b. These rules apply to gains realized either directly or indirectly (e.g., through a pass-through entity, such as a partnership)
If you own an interest or shares in a pass-through entity that realized gains early in 2023, the date of realization for that sale may have been December 31, or will be March 15. Speak with your tax advisors to determine the relevant date of realization, and how to measure the 180-day period in your circumstances.
4. Make timely distributions of private foundation assets – The general rule is that to avoid penalties, private non-operating foundations must distribute at least 5% of their assets annually to public charities. But if needed, you may have as many as 12 additional months to make distributions, as there is, in effect, a 12-month grace period. Check with your tax advisors to see what your private foundation’s final deadline for these distributions may be if the foundation’s situation requires more time.
We closely monitor both potential and enacted tax law changes at the federal and state levels. While we don’t expect the current Congress to pass any laws that would materially affect ordinary income or capital gains tax rates, we do expect some action in the next Congress, that is to say in 2025.
There are many options you may consider for your 2023 taxes and to prepare for 2024 and beyond. Your J.P. Morgan team can work with your tax advisors to help decide which options are best suited for you.
Rick Barragan is the Managing Director,
Los Angeles Market Manager, for J.P. Morgan Private Bank.
[email protected] | (310) 860-3658
privatebank.jpmorgan.com/los-angeles
Source: J.P. Morgan Private Bank, February 9, 2024. “Act now to lower your tax bill” Amanda Lott, Head of Wealth Planning Strategy, Advice Lab, Adam Ludman, Tax Advisory, Advice Lab, Tom McGraw, Head of Tax Advisory, Advice Lab, Jordan Sprechman, Practice Lead, U.S. Wealth Advisory, J.P. Morgan Private Bank.
