In the wake of an expensive 2022, CPAs and financial planners are urging people to find ways to save on their tax bills next year.
Even in the current economic environment, people can take several steps to cut their costs in 2023, says HHM partner Will Clegg. This includes self-employed Realtors, who are responsible for paying their own taxes.
While speaking with the local chapter of the Women’s Council of Realtors during its monthly networking luncheon this month, Clegg offered several tips he said could help agents minimize their tax liability in 2023.
His first suggestion: Stay organized.
“You have a lot of expenses you could easily lose – mileage to site visits with clients, small decor items for open houses, business cards and so on. Tracking everything with one business credit card, bank account, or app will help ensure you get to claim those deductions.”
Clegg also recommended speaking with a professional tax adviser early in 2023 and throughout the year to discuss the four quarterly estimate dates – April 15, June 15, Sept. 15 and Jan. 15.
“In most cases, you receive only a 1099 and will have to submit your own taxes. Depending on how much you’ve earned each quarter, a CPA can adjust your estimates to make sure you’re covered.”
Consulting a tax professional before buying or selling a business asset – such as a vehicle – is also important, Clegg stressed.
“Make sure you understand the tax consequences of any purchase you make.”
While addressing Realtors who manage teams of agents and support staff, Clegg said agents must ensure they properly classify each individual.
“Should they be a 1099 or do they meet the requirements to be a W-2 employee? Ask a tax professional if you’re not sure.”
During his presentation to the Women’s Council, Clegg also spoke about the 1031 Exchange, a tax break that allows a property owner to defer capital gains taxes by swapping one real estate investment property for another. The term derives its name from Section 1031 of the Internal Revenue Code.
“If you have investment property and are selling, use a 1031 exchange to your advantage,” Clegg instructed.
Closing gifts are another common tax break for Realtors. However, Clegg told agents to remember one important rule when deciding how much to spend: the maximum deduction for client gifts is $25 per person.
Clegg also urged Realtors maximize their retirement accounts, including their IRA, SEP and 401(k), as well as their Health Savings Accounts.
Finally, Clegg implored Realtors to begin applying these tips now to avoid a tax prep crunch at end of the year.
“HHM is here to help you with your accounting needs, so please call us with any questions you have.”
Contact HHM in Chattanooga at 423 756-7771.