To help you prepare on the upcoming tax season. Here is a guide to help with what you need to do to maximize your tax deductions and minimize your tax liabilities for this year.
1. You can still donate
With the special $300 tax deduction that was enacted during the COVID era, most taxpayers can give to qualified charity this year and get a deduction. Cash donations of up to $300 made before December 31, 2022, are now deductible. If you plan to give more, you save by itemizing your deductions.
2. Contribute to 529 Plans
A 529 plan is a tax-advantaged savings plan designed to encourage saving for future education costs and college tuitions. You can still establish a plan for your children and other family member by opening a 529 accounting in your State by the end of the year. Also note that there are States matching programs that with contribute a certain amount of money for your child if your income qualifies.
3. Harvest Capital Losses
Check if there are any capital losses to be realize by December 31, 2022, by selling some assets that have lost some value that cannot be recovered.
4. Take advantage of depreciation
If you want to invest in new equipment for your business, you can make the purchase before the end of the year and claim a full depreciation.
5. 401(k) & IRA Contributions
Use this opportunity to fund for your retirement if you still can by making a larger contribution on your last paycheck. Year end bonuses are the opportunity to save more money and reduce your tax liabilities.
Help maximize your retirement contribution if you have an IRA account. You have a bit more time to contribute before the deadline which is usually around April 15 of next year.
401(k) Contribution Limit
2022 Maximum deferral $20,500
2022 Catch-up and elective-deferral contributions $27,000
IRA Contribution Limit
Limits for Regular Contributions: $6,000
Limits for Catch-up Contributions for Taxpayers 50 and older: $1,000
Phaseout of IRA Deductions:
Single $68,000 - $78,000
Married Filing Jointly $109,000 - $129,000
Married Filing Separately $0 - $10,000
Head of Household $68,000 - $78,000
Qualifying Surviving Spouses $109,000 - $129,000
6. Estimated Tax Payments
The deadline for estimated tax payment is on January 15, 2023, to avoid a penalty if you owe a large amount of taxes. Take the time you review your previous tax return and determine you will have a tax liability instead of a tax refund. You can still make a payment toward it and save on penalties.
7. Consulting with us!
Make an appointment using our Client Portal at https://www.correctrefund.com/contact
Deadlines to take note of: Do not use this as an excuse to wait till the last minute, the sooner you file these, the less you’ll need to stress about it!