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Year-End Tax Tips

Year-End Tax Tips

December 06, 2022
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Behind in planning for your 2022 income tax bill?  Here are some last-minute tips.

You have only until December 31st to adjust your taxable income for 2022.  

First: Get a feel for your taxes due and your marginal (top) bracket. Taxes are layered (see below), so any reduction comes off the top, the highest layer.

Add your pay stubs, 1099s, a guess at net investment income, and an estimate of your net business income/loss.

Add up your itemized deductions to see if they are higher than the standard deduction, thus worth using.

                                                                                                                2022 Standard Deduction

Filing Status

Deduction Amount

Single

  $12,950

Married Filing Jointly

  $25,900

Head of Household

  $19,400

Source: Internal Revenue Source

 Apply your initial results to 2022 taxable income rate table* to find your bracket:

Tax Rate

   Single Filers

Married, Filing Jointly

Heads of Households

 

10%

    $0 to $10,275

      $0 to $20,550

    $0 to $14,650

 

12%

$10,275 to $41,775

    $20,550 to $83,550

  $14,650 to $55,900

 

22%

$41,775 to $89,075

  $83,550 to $178,150

  $55,900 to $89,050

 

24%

$89,075 to $170,050

  $178,150 to $340,100

  $89,050 to $170,050

 

32%

$170,050 to $215,950

  $340,100 to $431,900

 $170,050 to $215,950

 

35%

$215,950 to $539,900

 $431,900 to $647,850

$215,950 to $539,900

37%

   $539,900 plus   

    $647,850 +

    $539,900 +

Source: Internal Revenue Service

                                                                                             *For more detail, go to https://taxfoundation.org/2022-tax-brackets.

Then consider the options below to reduce your tax bill.

Securities:  Estimate income, capital gains and losses, which offset each other. You may have to guess on mutual funds. If you have a net positive, you can sell to book some losses or you can instruct your mutual fund sponsor to “tax-sell” shares to maximize losses.

           2022 Capital Gains Tax Brackets

 Tax

Rate

 Single Individuals,

 Taxable Income Over

 Married, Filing Jointly

 Taxable Income Over

 Heads of Households,

 Taxable Income Over

  0%

              $0

                $0

           $0

 15%

          $41,675

            $83,350

       $55,800

 20%

        $459,750

           $517,200

      $488,500

Source: Internal Revenue Service

 

Tax Credits:  See if you qualify for the Earned Income Tax Credit (limited income) or the Child Tax Credit. If a business owner, has your business collected on the business tax credits specifically earmarked for you?

Charity:  If you support a charity and itemize, or simply want to give, remember that donating appreciated securities counts at full value, rather than after capital gains tax. If not itemizing, you can still write off $300 per taxpayer.

Required Minimum Distributions:  For seniors, failure to take the required amount results in a 50% penalty tax (forfeiture) of the shortfall. Make sure that calculation is correct. Take it now!

Business Owners:  Make sure you are taking advantage of all the various methods of distributing earnings to your family from nepotism to expenses and medical reimbursement. Again, low-hanging tax savings credits?

Qualified Plans:  Your 401(k), 403(b), Simple Plan, etc. is building a future tax bomb. If 2022’s taxes will be lower than usual, consider withdrawing or converting some of your accumulated account. Get professional help on converting to a Roth IRA so there are no costly “loose ends.”

Putting it all together:  Check off those items you want to adopt or investigate. Get help from your financial planner, accountant, and broker as needed. Watch as that tax bill shrinks as a result of your actions.

Questions? Feel free to call us at (302) 856-2734, but understand there is little time to ponder or delay.