Category: Individual Tax Planning
Posted: December 2022
It’s time to think about steps that may help lower your tax bill for this year and next. Your professional tax preparers at Mierendorf & Co. stay on top of Federal and State taxes and tax law changes with continuous education and tax preparer resources. We can assist you with tax saving guidance.
Standard Deductions - Many taxpayers won’t want to itemize because of the high basic standard deduction amounts that apply for 2022 ($27,700 for joint filers, $13,850 for singles and marrieds filing separately, $20,800 for heads of household). You can still itemize
medical expenses that exceed 7.5% of your Adjusted Gross Income,
state and local taxes up to $10,000,
your charitable contributions,
plus mortgage interest deductions on a restricted amount of debt, but these deductions won’t save taxes unless they total more than your standard deduction.
Flexible Savings Accounts and Health Savings Accounts - Consider increasing the amount you set aside for next year in your employer’s FSA if you set aside too little for this year and anticipate similar medical costs next year.
If you become eligible in December of 2022 to make HSA contributions, you can make a full year’s worth of deductible HSA contributions for 2022.
Gift Tax - Make gifts sheltered by the annual gift tax exclusion before the end of the year if doing so may save gift and estate taxes. The exclusion applies to gifts of up to $16,000 made in 2022 to each of an unlimited number of individuals. You can’t carry over unused exclusions to another year.
Retirement Contribution Limits - For 2022, the elective deferral (contribution) limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is $20,500. For persons age 50 or older in 2022, the limit is $27,000 ($6,500 catch-up contribution). The catch-up contribution limit for employees aged 50 and over who participate in SIMPLE plans remains unchanged at $3,000. You can make 2022 Tax Year IRA contributions until April 17, 2023.
Required Minimum Distributions - RMD withdrawals from an IRA or 401(k) plan (or other employer-sponsored retirement plan) must be taken if you were 72 or older in 2022. Those who turned 72 in 2022 have until April 1, 2023 to take their first RMD, but may want to take it by the end of 2022 to avoid having to double up on RMDs next year. After your first withdrawal year, subsequent withdrawals are made annually by December 31. Individuals are not required to take RMDs from Roth IRAs. Your retirement account provider, financial or tax planner can help you better understand RMDs.
Federally Declared Disasters – If you were in a federally declared disaster area, you may want to settle an insurance or damage claim in 2022 to maximize your casualty loss deduction this year.
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