3 Last-Minute Strategies to Lower Your 2023 Taxes

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Want to owe the IRS less for 2023? Read on to see how. 

Paying taxes is something we all have to deal with. And they’re something a lot of us tend to resent. After all, when you work hard, it stinks to have to part with a portion of your income to pay the IRS.

But perhaps it’s even worse to think you’re done paying your taxes for the year, only to realize that you have an underpayment on your hands when you go to file a tax return in April. Such is a risk taxpayers will need to prepare for.

Mark Steber, Chief Tax Information Officer at Jackson Hewitt, says, “One trend we saw last year — and expect to be even bigger this year from the better economic conditions for 2023 — more taxpayers than ever might experience a balance due to the IRS or owing taxes when they file versus an expected tax refund.”

If you’re worried about owing money on your 2023 taxes, the good news is that there are a few moves you can make in the coming weeks to potentially lower your IRS bill. Here are three worth jumping on.

1. Sneak more money into your 401(k)

You have until next year’s tax-filing deadline to finish funding your IRA account for 2023. But for 401(k) contributions to count for 2023 purposes, that money needs to land in your account by Dec. 31 of this year. So if you’re able to sneak a little more money into your 401(k), you can potentially shield some extra income from taxes.

That said, 401(k) contribution changes have to be processed through your company’s payroll system. And that could take time. So if you’re serious about adding more money to your 401(k) before the end of the year, your best bet is to put in for that change immediately.

2. Sell an underperforming investment at a loss

Not every investment in your portfolio is guaranteed to be a winner. Perhaps you own shares of a stock that has consistently been losing value month after month for a while now.

If that’s the case, you may want to sell that stock at a loss prior to the end of the year. That’s because you can use your loss to offset capital gains in your brokerage account.

Let’s say you sold shares of stock at a profit earlier this year and gained $1,000 in the process. If you unload a bum stock and take a $600 loss, you’ll shrink your capital gains tax burden to just $400.

And if you don’t have any capital gains to offset this year, worry not. You can use a loss to offset up to $3,000 in regular income and then carry the remainder of your loss, if applicable, into future tax years.

3. Buy supplies or equipment for your small business or side hustle

If you’re solely a salaried employee, the supplies or equipment you buy to do your job can’t serve as a tax deduction. So even if you decide to invest in a pair of noise-canceling headphones to focus better at work, it won’t help you from a tax perspective.

However, things work very differently when you own a small business or earn income in a freelance manner. In that case, you should absolutely keep track of the various purchases you make that allow you to do your job.

Meanwhile, you may have a list of items you intend to buy for your business or side hustle in the new year. If you purchase them by Dec. 31 instead, they’ll count for this year’s tax write-off purposes.

Nobody wants to pay the IRS more money than they have to. If you employ these tips, you may find that you’re able to reduce your 2023 tax burden nicely.

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