It’s December That means that we’re less than a month away from a New Year. Although this time of year can be extra busy due to the hustle and bustle of the holiday season, it’s important that Taxpayers don’t forget to explore any final tax planning steps they may be able to take now to reduce their tax bill next April. Here are 4 quick tips for end-of-year tax planning.
- Check to see if you’ve reached your limit on retirement account contributions. In 2022, Taxpayers can contribute up to $20,500 to their 401(k) - $27,000 if they’re over the age of 50. Pre-tax contributions can help reduce your tax bill. Taxpayers should look at how much they’ve contributed so far to see if additional contributions are possible/beneficial.
- Contribute to your child’s 529 plan. The State of Louisiana offers a START Saving Program. Earnings on START accounts are tax-deferred until withdrawn. If the funds are used for certain education expenses, the earnings are exempt from state and federal taxes. Deposits to START accounts are deductible from reported Louisiana income (but are NOT federally tax deductible) – up to $2400/year per beneficiary - $4800 for Married-Filing-Joint Taxpayers.
- Consider selling investments at a loss to offset gains. “Loss harvesting” is when a Taxpayer sells investments at a loss and replaces them with similar investments. The Taxpayer can then offset any realized investment gains with those losses.
- Track your charitable giving. Charitable contributions are tax-deductible for Taxpayers who itemize deductions. The 2022 deduction limits are 30% of the Taxpayer’s adjusted gross income if non-cash assets are donated – 60% of the Taxpayer’s AGI for cash contributions. If Taxpayer’s aren’t sure how they’d like to give, a donor-advised fund allows Taxpayers to contribute now for tax deduction purposes and donate to charities later.
Interested in onboarding a Tax Professional for your 2022 tax needs NOW to plan a bit before the year’s end? Contact our office today.