Monthly Archives: November 2023

Holiday gift and tipping guide 2023 update

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“The best way to not feel hopeless is to get up and do something.  Don’t wait for good things to happen to you. If you go out and make some good things happen, you will fill the world with hope, you will fill yourself with hope.” ― Barack Obama

With inflation still a concern for many and their ability to support families, the holidays may be the time to say a special “thank you” to those who help keep us and our families, homes and businesses on track, who keep our homes clean, help us stay fit, and help us in other ways to get through each day throughout the year. 

Please be mindful that the message you intend may not always be obvious.  Any giving should show appreciation and respect.  Sometimes a smile, a kind word or even a note can really make someone’s day and have more lasting meaning than a Starbucks gift card.  

For those you can’t tip, you can still make them feel appreciated

The Pandemic has made us more appreciative of first responders and health care workers.  Many houses still display a sign with a red heart to say thank you.  

You can also send letters of thanks directly to a local hospital, fire station or police department or send a meal or buy coffee.  Check for any online bulletin board in your town, both to post a thank you note and to see if there are other ways to acknowledge your local first responders. 

“Neither snow nor rain…”

Despite the weather, terrain or traffic, your mail carriers, FedEx, UPS and Amazon drivers deliver your mail and packages every day and ensure that your online purchases arrive on time and in good condition. 

As you decide what and how much to give, check each particular company’s gift giving restrictions:

1.  Mail carriers – are prohibited from receiving cash gifts and gifts of more than $20.  Unfortunately, the limit has not increased for inflation.

2.  Garbage and recycling pickup – depending on what municipal rules permit, we suggest $25-$35.

3.  FedEx – employees are prohibited from accepting gifts, but a wave, a smile or a note would be nice.

4.  UPS – workers are allowed to accept tips, but UPS discourages the practice.

5.  Newspaper delivery – if you still get the news in print, a gift of $25-$35 is standard.

6.  Amazon driver – we suggest the same as for newspaper delivery. 

7.  Food delivery and curbside pickup – again we suggest the same as for newspaper delivery.

Caregivers (for kids, parents and pets, too!)

Caregivers for your children, parents and pets can be lifesavers as they provide care, education, exercise, and attention to those you care about most.  This is the time of year to let them know how thankful you are for all that they do.  The amount of service they provide and the arrangement you have with them can dictate the appropriate gift level:

1.  Nanny/au pair – a week’s salary and a small gift.

2.  Daycare teachers – a $25-$75 gift.

3.  Home healthcare worker – from one week up to a month’s salary.  If tips are not permitted, consider cooking or baking something special.  If the care is in a senior living or hospital setting, be sure to cover the whole shift.

4.  Teacher – a small gift and a handmade card from your child.  Note that a cash gift could be misconstrued as a bribe.  You can pool resources with other parents for a gift card. 

5.  Dog walker – depending on your walker’s schedule, you may want to give a day’s pay or a full week’s pay.

6.  Dog groomer – from half up to the full cost for a single service.

If you contract any of these services through an agency, you may want to contact the agency to find out if they have a gift-giving policy in effect.  If the agency prohibits gifts, consider alternatives like making a donation to the agency or sending in homemade cookies to the office – or sneak a Starbucks card into their stockings. 

Home Maintenance

Whether you live in a single-family home or a large apartment building, it’s likely there is someone who services your home or property in some way. 

1.  Trash and recycling collectors – a gift of $25-$35, which you may want to mail directly to the collection company if you can’t safely leave for the collectors.

2.  Doorman – a gift of $25-$100, depending on their role this year.

3.  Regular cleaning person – the cost of one visit.

4.  Landscapers/gardeners – a gift of $25-$50 per person or if you have just one person doing the work, the cost of one visit.

5.  Parking garage attendant – a gift of $25-$50.

6.  Building’s handyman, superintendent and custodian – a gift of $25-$100.

If you have someone who always goes the extra mile, such as a handyman who’s prompt and efficient or a doorman who is quick to carry heavy packages for you, then a larger tip may be warranted. 

Personal Services

It’s hard work keeping you fit, perfectly coiffed and beautiful, and ready to face the day.  Now is a good time to show appreciation for those efforts, especially when they help you get that special appointment when you really need it.  In deciding whether to tip and how much, consider this:

1.  Hairdresser/manicurist – if you’re a frequent visitor, tip the cost of one visit.  If you’re a less frequent customer, then $20.  However, if you tip generously through the year, you do not need to give an extra tip at the end of the year.  If multiple people work on your hair, divide the tip among them.  And if any of them double as your therapist, add a bit more!

2.  Personal trainer – up to the cost of one visit.

3.  Massage therapist – also up to cost of one visit.

4.  Golf or tennis         instructor or sax teacher – a thoughtful gift.

If you’re unable to tip or give a gift, a thoughtful thank you note will acknowledge the good work these people do for you throughout the year.   

Good feedback is appreciated by their supervisor as well as by the people who are helping you out. 

Send a thank you note to the supervisors of the people who provide you with great service throughout the year, letting them know how impressed you are with the service their people provide.

If you have any more ideas, let us know! 

Be safe and stay well! 

  • Steven

Year-end Tax Planning 2023-2024 and recent changes

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Tax planning overview and changes to review

First, some reminders:  income tax rates are likely to rise over the next several years and the TCJA rules expire after 2025, when we revert to pre-2018 tax laws.

Second, be practical:  start with reviewing what items you are able to change – for example, paying real estate taxes in one year may be better than another, but that is very hard to accomplish if you have escrow withholding on your mortgage payments.  On the other hand, you may be able to incur medical expenses all in one year, so you exceed the limit and are able to deduct a portion. 

Two-year goal: usually the goal is to reduce the total tax for the two years combined, some may benefit from increasing 2023 income to avoid higher future taxes.  One way to increase income that we have discussed before is a Roth conversion.

2023 changes:  There are a number of changes for this year, including rules for electric vehicles (EVs), energy efficient improvements, and other items, along with the impact of inflation on thresholds and exemptions for some items.

  • If you are considering energy efficient windows, doors, etc., the limits for the Energy Efficient Home Improvement Credit for 30% of the cost increased for 2023.  As for solar panels, fuel cells, battery storage, there is the Residential Energy Clean Property Credit of 30% of the cost of materials and installation.  Check to see if your anticipated improvements qualify and then retain the information needed to file for the credit.
  • As we noted previously, the clean vehicle credit for new and used EV purchases has changed, with vehicle price and income limits.  So, again, check to see if you qualify and then be sure to retain the information needed to file for the credit.

Retirement plans:  The age for required minimum distributions (RMDs) is now 73, so taxpayers turning 73 in 2023 have until April 1, 2024 to take their first RMD.  Tax planning on this is crucial, as taking the RMD before 2024 may result in a lower total tax for 2023 plus 2024 as you have the 2024 RMD due in 2024.  That is, two RMDs in 2024 could push you into a higher tax bracket.  

Charities:  For charitable giving, see if you can donate appreciated assets directly and avoid the capital gains tax.  Also, if you are considering a qualified charitable distribution (QCD), up to $100,000 counts for your RMD and you can send up to $50,000 to a charitable remainder annuity trust, charitable remainder unitrust or a charitable gift annuity. Many private colleges with charitable gift annuity programs have focused donation drives on QCDs.

Estates:  As noted in a prior post, the annual exclusion for gifting is now $17,000.  If you have plans to transfer wealth, keep this in mind.   

Withholdings:  As you adjust income and deductions, your tax due for each you will change, so be sure to review the safe harbor rules on withholdings and adjust or pay estimates as needed. 

Some ways to shift income:

  • Roth Conversion – One way to increase income now, avoiding future income, is to convert part of an IRA to a Roth IRA, converting from taxable to non-taxable distributions in the future.  Decide on the amount to convert by projecting the impact of the conversion on your marginal tax rate.  Converting to a Roth also saves you from required minimum distributions in future years (but non-spouse beneficiaries still face the 10-year clean-out we discussed before as part of the SECURE Act). 
  • Back-Door Roth – Along with converting, the “back-door Roth” is still available, at least for 2023, so you can put more retirement funds aside with no tax on future distributions.  That is, for those who cannot contribute to a Roth due to income limits, they can contribute to a non-deductible IRA and then convert that IRA to a Roth IRA. 
  • More income and deductions – Other ways to shift income include billing more in 2023 or delaying to 2024 for your S Corp., LLC or partnership, exercising stock options, and selling ESPP shares.  Businesses can buy vehicles and other capital assets for bonus depreciation write-offs in 2023.
  • Capital gains – You probably do not want to accelerate capital gains, as those should still be taxed at a lower rate in future years.  But you can utilize tax-loss harvesting to shelter gains already realized for 2023 by identifying any losses and realizing them in 2023.  If you want to buy back these securities, watch out for the wash-sale rules. 

On to other considerations – first, SALT deductions

The limit on state and local taxes, or SALT, has not increased, but, a number of states have created pass-through entity elections so that the S Corp., LLC or partnership pays the tax and deducts it against the income of the shareholder/member/partner.  This way, their net federal taxable income is reduced, and they get a credit for the payment on their personal tax returns. 

Review the SALT portion of your itemized deduction strategy if you are bunching. 

Check the details:

Declare Crypto – If you had any crypto currency transactions during the year, selling, buying or receiving, be sure to declare on your federal 1040 filing.

Unemployment tax – Remember, unemployment benefits are fully taxable for 2023, so be sure you withheld taxes or pay estimates. 

IT PIN – If you are concerned about identity theft, consider obtaining an IT PIN as discussed in our post on IRS scams.  

Flex accounts – Check to see if you have any flex account balances that expire that can still be used.  And consider HSA contributions.

Qualified plans and IRAs – Make sure to max-out on your 401(k) and other plans and make an IRA contribution if you can. 

Before you finish, check withholdings and estimates paid

Especially if you increase income in 2023, review your total paid to the IRS and state via withholdings and estimates to be sure that you meet the safe harbor rules.  If not, you could owe interest for under-withholding.

IRS disaster relief 

If you are in an area designated as a federal disaster area, this may affect your filing deadlines and ability to take casualty losses. 

And remember your estate plan review

While you review your taxes, review your estate plan as well.  The federal gift and estate tax credit  is close to $13 million for 2023, but that may change in 2024.  So, if you have excess wealth, you may want to gift while you can, especially if you want to use certain trusts, like a GRAT or QPRT, that may no longer be permitted in future years.  For more on estate planning updates, see our estate planning checkup post. 

  • If you do review your estate plan documents, also review beneficiary designations and asset ownership to make sure everything is current and flows correctly. 
  • For Massachusetts residents, the exemption increased from $1 million to $2 million as of January 1, 2023.  This may affect your portability planning on income and estate taxes in an estate – see Should your estate plan try to avoid income taxes rather than avoid estate taxes? for planning ideas.

Summary

As you review your 2023-2024 tax planning, consider the impact of future tax rate increases: will bringing future income into 2023 avoid taxes on future income?  Then follow through on the details. 

Let us know if you have any questions. 

Good luck and best wishes for happy and healthy holidays!

Steven