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.