2022 Year-End Tax Tips

 By following year-end tax tips before December 31, you can save on the 2022 taxes prepared in 2023.  The following are a few tips:

Compare standard versus itemized deductions — Your current or planned 2022 itemized deductions might be more than your standard deduction. If so, you’ll save tax dollars by itemizing.

If your itemized deductions are close to your standard deduction in 2022, consider shifting some of your deductions to 2023. At that time, you might be able to itemize more. Conversely, you might know you won’t have as many itemized deductions in 2023 as you do in 2022. If so, consider shifting some deductions from next year to this year.

Make flexible spending work for you — Make sure you have enough medical expenses in 2022 to meet the amount you set aside in your flexible spending account. If you don’t, you’ll lose the money. If you have extra money in the flexible spending account to spend, you might want to:

  • Schedule end-of-year appointments
  • Buy new prescription glasses and contact lenses
  • Buy hearing aids
  • Buy medicines you’ll need in 2023

Review your medical costs — Keep track of your unreimbursed medical expenses all year long. You can deduct them if they’re more than 7.5% of your AGI if you’re under 65 (7.5% if you’re over 65). If so, you might consider having an elective or necessary procedure before year-end.

Get serious about retirement — One way to lower your taxable income for the year is to contribute to a retirement plan.  Examples to include, 401(k), 403(b), deductible IRA, Simple IRA.

Adopt a charitable attitude — Donate clothing and household goods to charities before Jan. 1, 2023. It’s also deductible on your 2022 return. Get a receipt from the organization you’re donating to. The itemized deduction is limited to the item’s current fair market value (FMV) — what you could sell it for at a garage sale.

Sell off securities — If you have a net capital gain so far this year, you might want to sell some stock to generate a loss before year end. Doing so could reduce the amount of tax you pay this year. However, if you sell stock to generate a loss, you’re prohibited from purchasing substantially similar stock. This is 30 days before or after the sale that generated the loss.

Investigate before buying mutual funds — If you’re planning to invest a large amount in a mutual fund, find out when the fund declares its dividend. Confirm that the fund isn’t declaring a large dividend in December. If you buy shares before the dividend is declared, you’ll increase your income by the amount of the dividend.

Give the gift of cash –You can give a gift up to $15,000 to any one person free of gift tax. If you’re married, you each can give a person up to $15,000 tax free — $30,000 in total.  In most cases, the gift isn’t complete until the recipient of a check cashes or deposits it. So, confirm the recipient does this by the end of the year.

Don’t let extra money sit around — Consider investing in a short-term CD or a U.S. Treasury bill that matures in 2023.

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