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Turn the Page: Smart Money Moves to End (and Start) Your Year

The end of the year is a time for friends, family, holidays, and celebrations of all stripes. It’s also (unfortunately) a time to do some year-end clean up of your portfolio, harvest some tax losses, and get started on planning for 2024. So, to give you a head start before you have to meet your accountant, this month we’re exploring tax credits, including some you may have never heard of, and the most important numbers you need to know when planning for the year ahead. Plus, we’ll highlight some tax-efficient investments to save you money next year.

Sparklers and Champagne Glasses

The excitement of the holiday season is upon us—visits from family and friends, great food, and lots of football! And while most of us look forward to these happy times, for many of us, the last few weeks of the year also bring financial stress as we begin to gather our records for the dreaded tax season.

Most of the stress, honestly, is due to our lack of planning during the year. That may include overspending our budgets (or not having a budget!), not saving enough, and lastly, being unaware of and missing out on some great tax deductions and credits.

As we age, our thoughts naturally turn to our retirement years. Careless spending and lack of financial planning in our youth often results in golden years that are not what we had anticipated. That’s why it’s imperative that you address the first two issues early on. I’ve talked about them in several Cabot Money Club issues at length, so I won’t belabor those in this month’s issue. I’ll just say, yes, at first, it’s a lot of work, analyzing your spending and savings habits, but once you get beyond the initial tedium and commit to becoming present and disciplined, you’ll find it doesn’t take that much time and effort to maintain your budget.

The tax issue is more difficult. And that’s where a good financial planner comes in. Tax brackets, policies, credits, incentives, and deductions often change yearly, and it’s really easy to miss out on some new directive the IRS has come up with that can save you thousands of dollars. The IRS estimates that more than nine million people qualify for tax deductions they never take!

Many people won’t qualify for some of the deductions I’m going to discuss momentarily, so they’ll opt for the standard deduction. Here are the standard deductions for 2023:

Filing Status

2023 Standard Deduction

Single; Married Filing Separately


Married Filing Jointly; Qualifying Widow(er)


Head of Household


Important note: If you are at least 65 years old or blind, you can claim an additional 2023 standard deduction of $1,850 (also $1,850 if using the single or head of household filing status). If you’re both 65 and blind, the additional deduction amount is doubled.

But for millions of us, we can use Schedule A and come out ahead by itemizing our deductions.

I’ve addressed many of these money-saving tips in past issues, and if you’ll permit me, I’m going to reiterate some of the most important (as they bear repeating annually!), but in my research, I’ve also uncovered some new deductions and credits, as well as a few existing initiatives that are going to be eye-openers—and money-savers—for many of you.

Let’s get started!

Important Changes for Your 2023 Taxes

There are several significant tax changes that you’ll need to be aware of for 2023:

Alternative Minimum Tax (AMT) for high-net-worth individuals. This tax requires that folks with relatively high incomes calculate their taxes twice—under regular tax rules and under AMT rules —and then pay the higher amount owed. For example, state and local income taxes and property taxes are not deductible under the AMT.

Here are the AMT tax brackets for 2023 and 2024:

AMT rates are 26% or 28%.

2023SingleMarried, filing jointlyMarried, filing separately
Exemption amount$81,300$126,500$63,250
Income at which exemption begins to phase out$578,150$1,156,300$578,150
The AMT exemption amount for certain individuals under 24 equals their earned income plus $8,800.
2024SingleMarried, filing jointlyMarried, filing separately
Exemption amount$85,700$133,300$66,650
Income at which exemption begins to phase out$609,350$1,218,700$609,350
The AMT exemption amount for certain individuals under 24 equals their earned income plus $8,800.


Also available is a Credit for the prior year’s AMT tax. If you paid alternative minimum tax in a previous year but don’t have to pay it this year, you may be able to claim a credit, dependent on the deferral items, such as depreciation or incentive stock options that you exercised but didn’t sell.

Earned Income Tax Credit is designed to offset taxes for low-wage individuals. According to the IRS, these are the basic qualifications for this credit (as this is the IRS’s “current tax year,” 2022 data is the most recent available):

  • Have worked and earned income under $59,187
  • Have investment income below $10,300 in the tax year 2022
  • Have a valid Social Security number by the due date of your 2022 return (including extensions)
  • Be a U.S. citizen or a resident alien all year
  • Not file Form 2555, Foreign Earned Income
  • Meet certain rules if you are separated from your spouse and not filing a joint tax return

Certain COVID relief tax credits:

Child Tax Credit (CTC):

Credit changed from up to $3,600 under COVID relief in tax year 2021 to up to $2,000 in 2023, with $1,600 of the credit being potentially refundable.

  • Each dependent child must be under age 17.
  • No longer fully refundable but is refundable up to $1,600.
  • There were no advance payments issued for tax year 2023.
  • The credit is available if you earn up to $200,000 as a single taxpayer or head of household (or up to $400,000 if you are a married couple filing jointly).

Child and Dependent Care Credit:

  • Up to 35% of $3,000 ($1,050) of childcare expenses for your dependent child under 13, an incapacitated spouse or parent, or another dependent so that you can work or look for work.
  • If you have two or more dependents, the credit will be up to 35% of $6,000 in expenses ($2,100).
  • If you were able to take this credit in tax year 2021, the credit was increased considerably under COVID relief and was up to $4,000 (50% of $8,000) for one child and $8,000(50% of $16,000) for two or more kids.
  • The credit will be reduced at incomes over $15,000.

Inflation Reduction Act. I covered this thoroughly in our October 2023 issue; please review to make sure you are receiving all of your tax credits and deductions, including electric vehicles, home energy, senior and student discounts, etc.

Retirement Plan Contributions: The maximum contribution limit for 401(k) plans increased to $22,500 for 2023 ($30,000 if you are 50 and over). The maximum contribution limit for traditional and Roth IRAs increased to $6,500 ($7,500 if you are 50 and over). You can make a 2023 contribution to your IRA until the April tax deadline.

Annual Gift Tax exclusion for 2023 is $17,000 ($34,000 if you are married).

Those are the major changes. Please make sure to consult your tax expert to make sure you are taking full advantage of all of these adjustments.

Some Not-So-Well-Known Deductions/Credits

Now, let’s go onto some of those juicy deductions/credits for which you may not be aware:

American Opportunity Tax Credit (AOC) lets you claim all of the first $2,000 you spent on qualified education expenses (tuition, books, equipment, and school fees—but not living expenses or transportation) for the first four years of higher education—plus 25% of the next $2,000, for a total of $2,500.

Lifetime learning credit allows you to claim 20% of the first $10,000 you paid toward tuition and fees, for a maximum of $2,000 per year. Like the American Opportunity Tax Credit, the lifetime learning credit doesn’t count living expenses or transportation as eligible expenses. You can claim books or supplies needed for coursework. It can be used for undergraduate, graduate, and professional degree courses, including courses to acquire or improve job skills. There is no limit on the number of years you can claim the credit. It is worth up to $2,000 per tax return.

Adoption credit is a deduction for qualified adoption expenses paid to adopt an eligible child and also includes an exclusion from income for employer-provided adoption assistance. The credit is nonrefundable, which means it’s limited to your tax liability for the year. However, any credit in excess of your tax liability may be carried forward for up to five years. The maximum amount (dollar limit) for 2023 is $15,950 per child.

The credit begins to phase out at $239,230 of modified adjusted gross income, and people with AGIs higher than $279,230 don’t qualify.

Qualified adoption expenses:

  • Reasonable and necessary adoption fees,
  • Court costs and attorney fees,
  • Traveling expenses (including amounts spent for meals and lodging while away from home), and
  • Other expenses that are directly related to and for the principal purpose of the legal adoption of an eligible child (under the age of 18 or is physically or mentally incapable of self-care).

The IRS says, “An expense may be a qualified adoption expense even if the expense is paid before an eligible child has been identified. For example, prospective adoptive parents who pay for a home study at the outset of an adoption effort may treat the fees as qualified adoption expenses.”

For 2023 (taxes filed in 2024), the credit maxes out at $15,950. The credit phases out once MAGI (modified adjusted gross income) is $279,230 or more.

Saver’s credit

The saver’s credit pertains to tax savings on the contributions low-income taxpayers make to an IRA, 401(k), 403(b) or certain other retirement plans. The percentage depends on your filing status and income.

2023 Saver’s Credit

Credit RateMarried Filing JointlyHead of HouseholdAll Other Filers*
50% of your contributionAGI not more than $43,500AGI not more than $32,625AGI not more than $21,750
20% of your contribution$43,501- $47,500$32,626 - $35,625$21,751 - $23,750
10% of your contribution$47,501 - $73,000$35,626 - $54,750$23,751 - $36,500
0% of your contributionmore than $73,000more than $54,750more than $36,500

*Single, married filing separately, or qualifying widow(er)

Example: You and your husband earn $50,000. You decide to contribute a total of $5,000 to your IRAs in 2023. After deducting your IRA contribution, your adjusted gross income shown is $45,000. You may claim a 20% credit of $1,000 for your $5,000 IRA contribution on your 2023 tax return.

Educator expenses deduction allows educators to deduct up to $300 spent on classroom supplies. Spouses who are both educators and file jointly get a deduction of $300 each, for a total of $600.

Moving expenses for members of the military who are active duty is for members who had to move because of a permanent change of station.

Travel expenses for military reserve members are deductible if the member traveled more than 100 miles to perform reserve services.

Deductible mileage rates for business mileage are 65.5 cents per mile in 2023; for medical visits, 22 cents; and for charity, 14 cents.

Jury duty pay if your employer continued to pay you during your jury duty, and … you gave your jury duty pay to your employer.

Deduction for personal property rental if you are not engaged in a business that involves renting out your car or other personal property, but you still earn some income from renting out your property, you can deduct expenses related to that rental income, such as gasoline. I wasn’t even aware of folks renting out their personal vehicles until a friend visited me last year who had rented a car from an individual. She paid about two-thirds the rate of a rental from a big car rental agency. Expect this to become a well-used deduction!

Repayment of supplemental unemployment benefits. If you received an overpayment of unemployment benefits during the year, and you paid it back, you can deduct the amount overpaid.

Casualty & theft losses from a federally declared disaster. If you lost your home, vehicles, or other personal property in a federally declared disaster.

Early withdrawal penalties from a CD can be deducted from your federal taxes.

Credit for the elderly or the disabled is worth $3,750 to $7,500, if you are at least 65 years old or receive disability benefits, but it is dependent upon income limits of $12,500 to $25,000.

Low-income housing credit is for taxpayers who build a low-income rental building. State and local low-income housing authorities have about $9 billion (every year) to give away as credits for the acquisition, rehabilitation, or new construction of rental housing targeted to lower-income households. For more information, go to

Credit for excess Social Security and RRTA (railroad retirement) tax withheld. This usually applies to high-income folks (earning more than $160,000 annually in 2023), who, because of multiple employers, may have contributed too much to these retirement accounts.

Premium tax credit (PTC) is a health insurance subsidy that refunds your payments for health insurance premiums—if your estimated household income is between 100% and 400% of the federal poverty line for your family size.

And Then There Are Some Pretty Unusual Deductions…

Deduction for whistleblower fees for alerting the IRS to tax law violations—if you received an award from the agency. It includes attorney fees and court costs you paid in connection with helping the IRS.

Olympic medals (unfortunately, I’m not eligible for this one!) allows you to deduct the value of your medals and prize money (for the Olympics & Paralympics), as long as your gross income is less than $1 million.

Business expenses for performing artists with an adjusted gross income of $16,000 or less, and business expenses of at least 10% of their gross income, including expenses necessary to complete a rehearsal, may be deductible. However, you must have worked as a performing artist for multiple employers, and each employer must have paid at least $200.

Gambling losses may be deducted, but you have to offset them by your winnings (and that includes lottery tickets!).

A Quick Reminder of Common Deductions That You Don’t Want to Forget!

You are probably already aware of most of these, but it doesn’t hurt to recap them:

Student loan interest deduction, up to $2,500. Note that married but filing separately taxpayers are not eligible for this deduction. And the deduction phases out for single filers with MAGIs of $70,000 to $85,000 and joint filers with MAGIs of $145,000 to $175,000.

Charitable donation deductions can be used for your donations of cash or property, such as clothes or a car. In general, the IRL allows you to deduct up to 60% of your adjusted gross income. But be very careful here. The IRS now requires that you have a receipt for every contribution (the old “more than $250” is no longer applicable).

And in the case of a property donation, you may be able to double dip, but only if you’ve owned the property for more than one year. If so, you can deduct the property’s market value on the date of the gift and you avoid paying capital gains tax on the built-up appreciation.

Medical expense deductions can be taken for unreimbursed medical expenses that are more than 7.5% of your adjusted gross income for the tax year.

Mortgage interest deduction is available for taxpayers who itemize deductions. Also, mortgage refinancing points are deductible, but must be amortized over the length of the loan. And if your loan is for investment property, the IRS allows you to deduct that interest.

The SALT (state and local taxes) deduction allows you to deduct the value of your state and local property tax payments, plus either your income or sales taxes. The IRS says you may deduct up to $10,000 ($5,000 if married filing separately) for a combination of property taxes and either state and local income taxes or sales taxes.

Alimony payments, but only if your divorce agreement took effect in 2018 or earlier.

Business Deductions

Okay, I think that about does it for personal deductions. Now, if you are self-employed, you’ll want to pay attention to this section, as these are all deductions for your business.

Qualified Business deduction (QBI) is available if you had business income from a sole proprietorship, partnership, S corporation, trust, or estate. QBI allows you to deduct up to 20% of that income. You may also qualify if you had income from REIT dividends or from a publicly traded partnership (PTP).

Home office deduction for the part of your home that you use regularly and exclusively for business-related activity. The allowable expenses include rent, utilities, real estate taxes, repairs, maintenance, and other related expenses. You’ll need to calculate what portion of your home is used for your home office and prorate all expenses according to that. For example, if your home is 2,000 square feet, and your home office is 200 square feet, you can deduct 10% of your home’s expenses for your home office deduction.

Half of the self-employment tax. This tax is 15.3% for 2023. Those folks who are self-employed pay the entire tax (if you’re employed by a company, you only pay one-half) and then can deduct one-half of it on their tax returns.

Retirement contributions for self-employed individuals, including contributions to SEP IRAs, SIMPLE IRAs, and similar retirement plans.

Health insurance premiums (including dental and long-term care insurance) for self-employed workers may be deductible. And you may also be able to deduct any premiums you paid for your spouse, your dependents, and your non-dependent children who are under age 27.

The Archer MSA deduction applies to health care costs for self-employed individuals and small business employees who are covered by a high-deductible health plan (HDHP).

Lastly, there are two Covid-related tax credits for the self-employed and businesses with employees:

Tax Credits for Emergency Paid Leave

It’s still possible for employers who paid wages for emergency paid leave during the COVID-19 pandemic to be eligible for tax credits … if they were eligible but did not claim these credits previously or if they need to adjust the amounts they claimed. These laws and regulations are extremely complex, so please consult your tax advisor to see if you are eligible.

Employee Retention Credit (ERC).

You can’t turn on the television or radio without hearing an ad for some company that can help you claim the ERC. The IRS says “The ERC is a refundable tax credit for businesses and tax-exempt organizations that had employees and were affected during the COVID-19 pandemic.

“The requirements are different depending on the time period for which you claim the credit. The ERC is not available to individuals.”

For more information, please see And I also recommend you consult your tax professional.

More Ideas for Reducing/Deferring Your Taxes

Now that we’ve looked at the most important tax deductions that can help you save money, let’s look at a few more ideas to reduce or defer your tax nut (possibly into a future time when your tax bracket may be lower).

Reinvested dividends. Reinvesting your dividends is not a tax deduction, but a way to lessen your tax obligations. For investors who have mutual fund and stock dividends automatically reinvested in extra shares, each reinvestment increases your “tax basis” in the stock or fund, which reduces the amount of taxable capital gain (or increases the tax-saving loss) when you sell your shares.

However, the IRS considers any dividends you receive as taxable income, whether you reinvest them or not. However, they may not get taxed at the same rate as regular income. It depends on whether they are qualified or non-qualified.

Qualified dividends have to meet IRS holding period requirements (currently more than 60 days in the 121-day period that began 60 days before the ex-dividend date). That way, they are taxed at the lower long-term capital gains rates.

Non-qualified dividends, also called ordinary dividends, get taxed as ordinary income, and the tax rate can be as high as 37%.

Of course, you can avoid immediate taxation on dividends if you hold the securities in your retirement accounts.

Avoid the kiddie tax. This tax resulted from families shifting investment income to their children in order to reduce their tax bill. The IRS objected! For 2023, a child’s investment income above $2,500 is taxed at the same rates as the parents.

Take your minimum required IRA distributions. Right now, you are required to begin taking minimum distributions from your traditional IRA by April 1 of the year after which you reach age 73 (70 1/2 if you reached 70 1/2 prior to January 1, 2020). If you do not do this in a timely manner, the IRS can penalize you with a 50% excise tax on the amount you should have withdrawn based on your age, your life expectancy, and the amount in the account at the beginning of the year.

Healthcare Flexible Spending Accounts. In 2023, you can contribute up to $3,850 if you have health coverage just for yourself or $7,750 if you have coverage for your family. The contributions in these accounts avoid both income and Social Security taxes. But please note, if you don’t use it all by the end of the year, you lose it! However, your employer may have

adopted a grace period permitted by the IRS, which allows employees to spend 2023 set-aside money as late as March 15, 2024. Check with your employer ASAP!

Defer your income to a later period. For instance, if you think you will earn less income next year, or have more expenses to offset your income, you may defer any year-end bonuses until the following year, thereby reducing your taxable income for the current year.

If you are self-employed, consider deferring any billings into the new year. You can also defer income by taking capital gains in 2024 instead of in 2023. And you can reduce income by accelerating some deductions, including:

  • An estimated state income tax bill due January 15
  • A property tax bill due early next year
  • A doctor or hospital bill.

Tax-loss harvesting is simply selling losing investments to offset some gains you’ve taken on your winners. I covered this concept at length in my December 2022 issue.

The end goal is to defer income taxes many years into the future, hopefully, after you retire, when you’ll probably be subject to a lower tax bracket. And in the meantime, your portfolio will continue to expand as you are deferring taxes on your gains, instead of depleting the portfolio to pay capital gains taxes each year.

There are specific rules to tax-loss harvesting, so please refer back to my last December issue, and also consult your tax pro.

Invest in Tax-Deferred or Tax-Exempt Investments

Tax-advantaged accounts can be tax-deferred or tax-exempt.

Tax-deferred are accounts such as 401(k)s or traditional IRAs. When you finally begin withdrawing from them, most folks will likely be in a lower tax bracket, as they’ll be retired and no longer actively earning large salaries.

Tax-exempt accounts are investments that include Roth IRAs and Roth 401(k)s in which contributions are made in after-tax dollars. Your investments grow tax-free and qualified withdrawals in retirement are tax-free as well.

Invest in Tax-Efficient Investments

Novice investors are often surprised at the end of the year when their mutual funds distribute earnings and/or dividends and they find out they owe taxes on them, even if they haven’t sold the investment during the year.

That’s why tax-savvy fund and ETF investors often invest in tax-managed funds and ETFs, which are designed to incur fewer capital gains.

And that’s why these same investors also look at certain bonds, such as municipals (no taxes at the federal level, and sometimes at the state and local level also); Treasury bonds and Series I bonds (savings bonds) are also tax-efficient because they’re exempt from state and local income taxes.

Looking Forward to 2024: New Tax Brackets and a Higher Standard Deduction

The IRS has just adjusted 2024’s tax brackets, up by 5.4%, due to inflation. The good news is, if your earnings haven’t kept up with inflation, you may pay less taxes!

Here are the new brackets:

Marginal tax brackets for tax year 2024
Married filing jointly

Taxable incomeTaxes owed
$0 to $23,20010% of the taxable income
$23,201 to $94,300$2,320
Plus 12% of the amount over $23,200
$94,301 to $201,050$10,852
Plus 22% of amount over $94,300
$201,051 to $383,900$34,337
Plus 24% of amount over $201,050
$383,901 to $487,450$78,221
Plus 32% of amount over $383,900
$487,451 to $731,200$111,357
Plus 35% of amount over $487,450
$731,201 or more$196,669.50
Plus 37% of the amount over $731,200

Source: CNBC

Marginal tax brackets for tax year 2024
Single individuals

Taxable incomeTaxes owed
$0 to $11,60010% of the taxable income
$11,601 to $47,150$1,160
Plus 12% of amount over $11,600
$47,151 to $100,525$5,426
Plus 22% of amount over $47,150
$100,526 to $191,950$17,168.50
Plus 24% of amount over $100,525
$191,951 to $243,725$39,110.50
Plus 32% of amount over $191,150
$243,726 to $609,350$55,678.50
Plus 35% of amount over $243,725
$609,351 or more$183,647.25
Plus 37% of the amount over $609,350

Source: CNBC

Note that the charts are labeled “marginal tax brackets.” That simply means your total earnings are not taxed at the percentage quoted, but are taxed in increments, after being reduced by your standard or itemized deductions from your gross income.

So, for example, let’s say you are married and file jointly and you earn $120,000. That puts you in the $94,301 to $201,050 bracket. Here’s your tax calculation:


Plus 22% of the amount you earn over $94,300. That is equal to $120,000-94,300, which is $25,700. So, you will pay an additional $5,654 (22% x $25,700).

Your total tax is $10,852 + $5,654 = $16,506

Please consider these new brackets as you plan for your withholding from your paycheck for the 2024 tax year.

The IRS also boosted the standard deduction, the deduction you can take if you don’t itemize your taxes, to $14,600 for single filers in 2024, up from $13,850 in 2023. And for married couples filing jointly, it rises from $27,700 to $29,200.

3 Tax-Efficient ETF and Fund Ideas

Well, if you’re still with me (and I hope your eyes are not entirely glazed over!), I’d like to offer a few suggestions for some broad market-based tax-efficient ETFs.

I’ve run these through my analysis parameters and think they are each attractive. I hope that you might find one to your liking.

S&P 500 Ishares Core ETF (IVV)
5 Stars
Average Risk

Total Return %YTD1-Year3-Year5-Year10-Year15-Year
Total Return % (Price)18.9914.739.5812.4211.6613.75
Total Return % (NAV)18.9514.699.5712.4111.6613.75
Top 10 Holdings% Portfolio WeightSector
Microsoft Corp7.35 Technology
Apple Inc7.33 Technology Inc3.49 Consumer Cyclical
NVIDIA Corp3.24 Technology
Alphabet Inc Class A2.11 Communication Services
Meta Platforms Inc Class A1.97 Communication Services
Alphabet Inc Class C1.82 Communication Services
Berkshire Hathaway Inc Class B1.72 Financial Services
Tesla Inc1.67Consumer Cyclical

Vanguard Tax-Managed Small Cap Adm (VTMSX)
4 Star
Average High Risk

Total Return %YTD1-Year3-Year5-Year10-Year15-Year
Holdings% Portfolio WeightForward P/ESector
Comfort Systems USA Inc0.6920.33 Industrials
SPS Commerce Inc0.65 Technology
Rambus Inc0.64 Technology
Applied Industrial Technologies Inc0.62 Industrials
Fabrinet0.61 Technology
Ensign Group Inc0.5820.24 Healthcare
SM Energy Co0.555.04 Energy
e.l.f. Beauty Inc0.5444.44 Consumer Defensive
ATI Inc0.5214.86 Industrials
Hostess Brands Inc Class A0.4727.25 Consumer Defensive

Schwab International Equity ETF (SCHF)
4 Star
Average Risk

Total Return %YTD1-Year3-Year5-Year10-Year15-Year
Total Return % (Price)9.8610.263.795.663.85
Total Return % (NAV)1010.184.25.893.96
Holdings% Portfolio WeightSector
Novo Nordisk A/S Class B1.68 Healthcare
Nestle SA1.61 Consumer Defensive
ASML Holding NV1.44 Technology
Samsung Electronics Co Ltd1.36 Technology
Toyota Motor Corp1.22 Consumer Cyclical
Shell PLC1.18 Energy
Novartis AG Registered Shares1.06 Healthcare
LVMH Moet Hennessy Louis Vuitton SE1.02 Consumer Cyclical
AstraZeneca PLC1.01 Healthcare
Roche Holding AG1.01 Healthcare

Each of these ETFs and funds mirrors their related index. I would recommend any of them. There are many more tax-efficient ETFs available, but these are a good start.