The holiday season can be a very hectic time, but most importantly, it should be a joyous time of the year creating those special moments with friends and family. Nobody wants to see the tax grinch spoil the fun. In the midst of all of the holiday shopping and preparations, it’s important to leave yourself a small bit of time to look back on 2022 from a tax perspective and remember this important checklist of things to review that might help reduce your tax burden come filing time:
- If you have an FSA, use it by year-end. You can only carry forward around $610 to 2023. If your company has a plan with a grace period, you might get a few months in 2023 to use it
- Look at your realized gain/loss year to date on any stocks/other securities sales. If you have a realized gain, see if there are any stocks you can sell at a loss to reduce the gains.
- If you itemize deductions, donate your household items to charitable organizations before 12/31, but make sure you get a receipt and value noncash contributions over $500 properly
- If you own any business real estate, make those structural improvements before 12/31, if possible. The bonus depreciation rules are changing and starting in 2023, they are being phased out. You can only take 80% bonus depreciation in 2023 so 2022 is the last year you can elect 100% bonus depreciation if applicable.
- Open a Donor-Advised Fund if you’ve had an unexpected windfall in 2022. You can take the full deduction for any contributions to the fund in 2022, up to 30% of your Adjusted Gross Income
- Max out your 401K contributions if you have the ability to do so
- Make any traditional IRA contributions up to the maximum contribution ($6,000 per person; it is $7,000 if over age 50); however, you do have until the filing deadline to earmark a contribution to the previous tax year (2022)
- Make your 529 contributions so you can get a deduction on your state return. Amounts vary by state but be sure to keep contributions below the annual gift exclusion limit
- Pay your property tax bills before year-end
- Consider prepaying your tuition bills due in January so you can possibly claim an additional education credit if you haven’t maxed it out for the year already.
- Make that final estimated tax payment to cover your unwithheld income if appropriate. Note you have until 1/17/23 to make that final 2022 estimated payment.
What not to do:
- Take your bonus before year-end
- Avoid wash sales when selling and purchasing financial securities
- Avoid taking an early retirement distribution from your IRAs unless you truly have no other choice. There will be 10% penalties assessed on your 2022 tax return
- Give money to your family above the gift tax exclusion limit: For 2022, the limit is $16,000 per done ($32,000 if 2 spouses)
Utilizing any of these strategies can help ensure you keep the tax grinch away during the holidays and get some extra benefits come tax filing time.
Planning your taxes can be a complex and confusing process, but it doesn’t have to be. Our team of experts will help you get the most out of your tax return and get one step closer to financial peace of mind. For further assistance, call us today at 404-900-1040 or schedule an appointment now.
Al Meyers, CPA, MBA