As the end of the year approaches, it’s important to start thinking about your tax situation. Taking some time now to plan can save you a lot of money and frustration come April. Here are three quick ideas to consider to help lower your taxes this year.
Retirement Savings
If you haven’t already done so, now is the time to max out your retirement accounts. Employee contributions to an employer sponsored plan must be made by December 31st 2022 in order to reduce 2022 taxable income. Contributions to IRA accounts can be made up until the April 15th deadline but have limits on what can be contributed based on your income and access to an employer sponsored account.
Maximize Deductions
Make sure you’re taking advantage of all the deductions and credits you’re eligible for. Common deductions include mortgage interest, property taxes, and charitable donations. Consider paying your January mortgage bill in December and accelerate the tax deduction by a full tax year. With a relatively higher standard deduction, consider the use of a donor advised fund and charitable “bunching” as a way to maximize the tax benefit while maintaining your charitable intent.
Tax Loss Harvesting
If you have investments that have lost value, selling them now may be a good idea. By selling at a loss, you can offset any capital gains you may have had during the year and lower your tax bill as a result. Even if you don’t have capital gains this year, losses recognized this year can help offset other income up to certain limits and will carry forward to offset gains in future tax years. Beware the wash sale rules, and consult with your advisor.
Throughout the year, make sure to keep track of all your receipts and other documentation related to your taxes. This will make it much easier come tax season and help ensure you don’t miss any deductions or credits you’re entitled to. In addition, keeping organized throughout the year will save you time and stress when April rolls around.
Additionally, we have put together a more comprehensive checklist that you can refer to for other tax planning ideas and strategies to consider before the end of the year. Click here to access our 2022 Year End Tax Checklist.
The information contained herein is intended to be used for educational purposes only and is not exhaustive. Diversification and/or any strategy that may be discussed does not guarantee against investment losses but are intended to help manage risk and return. If applicable, historical discussions and/or opinions are not predictive of future events. The content is presented in good faith and has been drawn from sources believed to be reliable. The content is not intended to be legal, tax or financial advice. Please consult a legal, tax or financial professional for information specific to your individual situation.
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