Here are two pieces of good news regarding federal and state taxes, as well as some financial planning tips, to make this new year even better.
As Federal income tax brackets rise to account for inflation, the current economy may result in a portion of 2023 income being taxed in a lower bracket. Deductible contributions to a “qualified” plan – such as an IRA that generates tax-deferred income – may also result in a lower tax bracket. Additionally, some donations may also cause certain donors to benefit from a lower tax bracket. (for example, when a retiree over 72 directs a required minimum distribution to a qualified charity like the Gulf Coast Community Foundation). Regarding the Mississippi income tax, this year the first $10,000 earned will not be taxed, and income over $10,000 will be taxed at 5%. This rate will decrease over the next three years to 4% for tax year 2026.
Savvy individuals ensure that our financial documents (e.g. life insurance policies, bank accounts, brokerage accounts, and wills) have been updated within the past five years. Even if your family “knows what I want,” their knowledge under Mississippi law has no legal effect, making it far more expensive to resolve after-death affairs without a will. Further, any substantial lifetime gifts (of property, for example) should be made only after discussion with a qualified tax professional.
Advanced planning can substantially reduce your 2023 tax bill and help avoid year-end surprises!
Paul M. Newton, Jr. is an attorney in Gulfport, and is licensed in both Mississippi and Louisiana. Mr. Newton received his law degree from the University of Mississippi and obtained a Masters of Law in Taxation from New York University. Mr. Newton has served as the Chairman for the Mississippi State Bar Section on Taxation, and has been selected by his fellow national attorneys for inclusion in the Best Lawyers in America annually since 1993 in the specialties of corporate law, corporate litigation, business law, business litigation, tax law, tax litigation, estates and trusts, and estates and trusts litigation. He may be reached at firstname.lastname@example.org or (228) 863-8827.