Decode Your 2023 Tax Return: A Treasure Map to Future Savings

Decode Your 2023 Tax Return: A Treasure Map to Future Savings

April 24, 2024

Discover Hidden Gems in Your Tax Return

Imagine your completed 2023 tax return as a treasure map. It's not just a record of your income and taxes paid; it's a map dotted with hidden gems and clues that can guide you to tax savings for 2024. Let's explore key landmarks and uncover opportunities buried in the numbers. 

Before we start our journey through your tax return, download this Tax Review Checklist for Retirees to guide you through each step. Use it to find savings and ensure you don’t miss any opportunities as we explore the sections of your tax return.

The Starting Point: Your AGI (Adjusted Gross Income)

Consider your Adjusted Gross Income (AGI) as your treasure map’s starting point. This number is on line 11 of Form 1040 and summarizes your yearly earnings minus certain deductions like IRA contributions or student loan interest. Knowing your AGI is like understanding the terrain—it sets the stage for planning your route to reduce next year’s taxes.

Navigating Through Deductions: Standard vs. Itemized

As we follow the path laid out by your tax return, we encounter a fork in the road: the decision between standard and itemized deductions. Each path offers different opportunities:

  • The Standard Path: Easy, but may not always lead to the highest savings.
  • The Scenic Route of Itemization: This route requires more documentation but uncovers areas like mortgage interest, medical expenses, and charitable donations. Could you enhance these deductions next year? Perhaps by timing donations or medical procedures strategically?

Exploring Credits: Hidden Coves of Savings

Tax credits are like unexpected coves along your journey—each one potentially sheltering valuable savings. Have you considered exploring the Child Tax Credit, Education Credits, or perhaps credits for energy-saving home improvements? These are not just reductions in your taxable income; they’re dollar-for-dollar reductions in your tax bill, making them a valuable part of your tax planning strategy!

Investment Income: Buried Treasure

Interest, dividends, and capital gains are the treasures buried within your portfolio. Each type has its own tax implications and strategies.

  • Interest and Dividends: Could shifting into tax-advantaged accounts like Roth IRAs or municipal bonds help shield some of your treasure from taxes?
  • Capital Gains: Selling strategies such as tax-loss harvesting can offset gains, turning potential tax events into opportunities for future growth.

Retirement Contributions: Investing in Future Treasures

Maximizing contributions to your IRA or 401(k) can be like stashing gold in a tax-sheltered cave. Did you contribute as much as possible, reducing your taxable income and building wealth for retirement?

Adjust Your Sails: Withholdings and Projections

Did 2023's taxes leave you owing money or receiving a large refund? Adjusting your tax withholdings can help you manage your cash flow more smoothly, avoiding surprises at year’s end.

Planning for the 2024 taxes starts now as well. What is your target income to minimize Medicare surcharges if you are 63 or older? Consider your savings withdrawal strategy to ensure you don't accidentally bump yourself into a higher IRMAA MAGI bracket. Are qualified charitable distributions in your plans? You need to make these contributions first if you want them to count as required minimum distributions. The Important Numbers Guide can help lay out your 2024 tax plan. 

Quarterly Checkpoints: Navigate with Precision

The sea of tax laws changes frequently. Regular reviews with your financial planner—your navigator in this journey—ensure you’re always on the best course, adapting to new laws and personal circumstances.

Empower Your Voyage

Now that we've navigated your tax return details and identified potential opportunities, download the Tax Review Checklist for Retirees if you haven’t already. This tool will help you apply today’s insights to your return, ensuring you are well-prepared to tackle 2024 taxes smartly and confidently.

The content is developed from sources believed to provide accurate information. The information in this material is for educational purposes only and is not intended as tax, investment, or legal advice. It may not be used to avoid any federal tax penalties. Please consult legal, investment, or tax professionals for specific information regarding your situation. Mayfair Financial and FMG Suite developed and produced this material to provide information on a topic of interest. FMG is not affiliated with the named state-registered investment advisory firm. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security.