Brian kicks off 2023 with tactical tips to start the new year. Now that you’re hopefully relaxed and ready for a new year, Brian digs into the numbers to give you some targets to aim for over the next few months. He covers revenue, retirement, health savings accounts, and more.
Look for new revenue figures.
Because of inflation, many revenue and tax figures have increased quite a bit in 2023, meaning you can make more money and still pay less in total tax. For example, in 2023 single filers with a taxable income of $95,376 – $182,100 will have their last dollar taxed at 24%. Last year, that same tax bracket ended at $170,050.
Don’t forget the QBI deductions.
If you’re a business owner, don’t forget about the Qualified Business Income (QBI) deduction. QBI allows pass-through entities like partnerships and S-Corps to take a 20% deduction on their business income, saving some businesses thousands of dollars.
Importantly, you lose the QBI deduction if you exceed certain income thresholds. For instance, the QBI deduction begins to phase out at $182,100 in taxable income and goes away after $232,1000 in taxable income.
Use retirement accounts to shelter income from taxes.
Maximizing contributions to retirement accounts is one strategy to avoid taxes and save money for your future self. Here are some things to know about common retirement plans:
- 401(k)s and Solo 401(k)s: Employees can contribute up to $22,5000 plus an additional $7,5000 in catch-up contributions if you are 50 or older. Employers contribute another $43,500.
- SEPs: You can contribute 25% of your net self-employment earnings or $66,000 — whichever is less.
- SIMPLE IRAs: Employees can contribute up to $15,500 with a catch-up contribution of $3,500 if you are 50 or older.
- Traditional IRA or Roth IRA: You can contribute up to $6,500 with a catch-up contribution of $1,000. Importantly, Roth IRAs have income range phase-outs, starting at $138,000 for single filers and $218,000 for married filers.
Consider opening an HSA.
A Health Savings Account (HSA) is one of Brian’s favorite savings vehicles and one of your few options to save money on taxes up until April of the following year. An HSA offers triple tax savings:
- The contributions are tax-deductible.
- The money grows tax-free in your account.
- Withdrawals are tax-free if the money is used to pay qualified medical expenses.
For 2023, you can contribute up to $3,850 for eligible individual plans and $7,750 for eligible family plans. You can also open and contribute to an HSA if you’re self-employed.
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About Brian and the Mission Driven Business Podcast
Brian Thompson, JD/CFP, is a tax attorney and certified financial planner who specializes in providing comprehensive financial planning to LGBTQ+ entrepreneurs who run mission-driven businesses. The Mission Driven Business podcast was born out of his passion for helping social entrepreneurs create businesses with purpose and profit.
On the podcast, Brian talks with diverse entrepreneurs and the people who support them. Listeners hear stories of experiences, strength, and hope and get practical advice to help them build businesses that might just change the world, too.