As we close out 2022 and ring in 2023, there are some choices you can make to possibly lower your taxes. Consider these tips before year-end to help your 2022 taxes and beyond.
1. Contribute to tax-advantaged accounts.
You must make your final contributions to a 401(k) or 403(b) by December 31st. You can contribute up to $20,500 before taxes. If you're 50 or over, you can make additional catch-up contributions of $6,500. That money reduces your taxable income dollar for dollar. And don't forget about health savings accounts (HSAs) if you have a high-deductible health plan. While you have until the April tax filing deadline to contribute, you can put away up to $3,650 for an individual and $7,300 for a family.
2. Consider a Roth.
Transferring money in a traditional IRA to a Roth IRA is another tax saving tip. You'll pay taxes on the converted amount, but then the money has growth potential and can be withdrawn tax-free, and it isn't subject to a required minimum distribution for the life of the owner. Why consider a Roth IRA conversion now? First, with many investments down this year, you can convert more shares for the same total amount and same potential tax bill. Also, tax rates are set to increase in 2026, so you could end up paying higher rates later on conversions.
3. Defer some income.
If you have freelance income, you could delay billing for your services until next year. Speak with your accountant to be sure if this is a good option for your situation.
4. Donate appreciated assets. Itemizers can also donate appreciated assets held longer than one year to a qualified public charity and deduct the fair market value of the asset without paying capital gains tax. The donation is subject to a 30% adjusted gross income (AGI) limitation.
5. Consider gifting to loved ones. You can gift up to $16,000 per recipient to as many people as you like. While you don't get an income tax deduction for such gifts, the recipient won't owe taxes, and the gift can help reduce the value of your estate, without using up your lifetime gift and estate tax exemption.
Want to hear more year-end tax tips? Click on this link for more details and tips: Top Tax Tips for 2022 or contact our office at Brien@TraditionsWealthAdvisors.com or 979-694-9100 with questions.