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Are you ready to close out the year by implementing sound tax planning strategies with tax and legal advisors to optimize your tax planning? These decisions affect the amount of taxes you’ll be paying in April of 2023. Check out these adjustments you can make before reaching year-end.
-Check Your Withholding: It’s important to have enough money withheld from your paycheck so you don’t have to pay a higher tax bill in April. See the IRS’s Tax Withholding Estimator (https://apps.irs.gov/app/tax-withholding-estimator) to learn whether you need to file a new Form W-4 with your employer to raise the amount of your taxes being withheld.
-Tax Law Changes: Your tax advisor can let you know about legislative changes regarding the COVID-19 pandemic as well as how the recent Inflation Reduction Act might affect your 2022 federal income tax liability. This encompasses credits for health care benefits, energy-efficient home improvements, residential clean energy, and clean vehicle and used clean vehicle credits.
-Standard Deduction Increases: Due to inflationary adjustments, your 2023 standard deduction will be even larger than the 2017 Tax Cuts and Jobs Act amount, allowing you to claim the larger allowance next year even when you are not itemizing your deductions. For both single and married individuals filing separate returns, the amount is $13,850. For those using head-of-household filing status, the amount is $20,800, and for married couples filing jointly, it is $27,700.
-Prepayment: You can pay your bills for 2023 now instead of next year, especially if you know whether you are planning to itemize or claim the standard deduction when filing your 2022 tax return. Check your medical bills for any unreimbursed medical expenses you might be able to deduct. You can even pay your property taxes early when itemizing deducting up to $10,000 from your state and local taxes. Have a child in college in their first four years of studies? You can prepay the first quarter tuition bill and take advantage of the American Opportunity Tax Credit for undergraduate students, up to $2,500.
-Retirement Savings: Consider contributing a bit extra from your paychecks to your retirement savings for the rest of the year, up to $20,500 for your 401(k), 403(b) or federal Thrift Savings Plan in 2022, along with $6,500 in catch-up contributions if you are over 50. You can also convert a traditional individual retirement account (IRA) into a Roth account if you are in the same (or higher) tax bracket during your retirement years.
-Energy Tax Incentives: Are you considering making energy-efficient improvements to your residence? Install heat pumps, solar panels, HVAC systems or energy-efficient water heaters after December 31, when the law goes into effect while taking tax incentives offered by the Inflation Reduction Act of 2022. Or maybe you are looking to purchase a new or used vehicle? If so, this law allows for a plug-in vehicle credit called the “clean vehicle credit,” and there’s no limitation on the number of vehicles eligible. If you are buying a used vehicle that meets requirements starting in the new year, you may also qualify for a lower federal tax credit.
-Professional Classes: Planning on taking a class to advance your professional qualifications? You can prepay the January bill before December 31 and claim the Lifetime Learning Credit on your 2022 tax return. Worth up to 20% of your out-of-pocket costs for tuition, fees and books, you can go up to a maximum of $2,000.
-Contribute to a 529 Plan or ABLE Account: This will lower your state taxes, and you can deduct a part of your 529 plan contributions. More than 30 states allow this; look up your state’s rules at savingforcollege.com. If you or a family member has special needs, you can contribute up to $16,000 (this year) to an ABLE account. This helps those with disabilities to save some cash while not getting in the way of government benefits. Read more details here: https://www.brinkersimpson.com/blog/10-tax-planning-tips-for-the-end-of-the-year.
-Tax Benefits/Harvest: You can sell investments that fell under your purchase price and still use the loss to offset capital gains in taxable accounts. If you are a lower-income investor (less than $41,675 for single filers and $83,350 for joint filers), you won’t pay capital gains tax on investments you have held for over a year. If you want to buy a mutual fund before 2022 ends, check its website first. If the fund plans to make a capital gains distribution, you’ll want to postpone buying until after the distribution date so that you don’t end up paying taxes on gains made before you came aboard. Read more details here:
https://www.brinkersimpson.com/blog/10-tax-planning-tips-for-the-end-of-the-year.
-Max Out Charitable Donations: Taxpayers who itemize benefit from donations made, whether it’s clothing, housewares or furniture, all can increase their deductions for the year base on the item’s “fair market value” (or what it could sell for at a thrift store). You’ll need a receipt from the organization if the amount you are claiming is $250 or over. If you are donating items valued at more than $5,000 (art, antiques, etc.), you’ll need to attach a written appraisal. You can deduct a cash donation up to 60% of your adjusted gross income.
-Year-End Giving: Spouses giving joint gifts to a third person are exempt from gift taxes up to $32,000, or $16,000 each. Gifts that are “future interests” (like gifts in trust that the receiver will enjoy down the road) won’t qualify for an exemption. Gifts for the benefit of a minor child, however, can qualify. Gift tax returns for this year are due on the same date as your income tax return, April 2023.
(For more in-depth details about health savings accounts, investment gains and losses, mutual fund investments and much more, read this article: https://www.mymcmedia.org/blog-year-end-tax-planning-strategies-for-individuals/.)
The Corporate Capital Difference
As the year winds down, Corporate Capital, Inc. based in Las Vegas, Nevada, is here to assist you with your personal and business needs. We can help with setting up corporations and LLCs to building business credit and estate planning. Our skilled CPA’s and accountants are pros at tax planning and preparation and look forward to putting thousands of dollars back into your wallet each year. Let us help you evaluate your 2022 numbers to see how tax planning makes sense for you. Give us a call at 855-371-0070 today!