7 Tax and Money Moves To Make Before Year End
Below are a few steps you can take to minimize your tax and/or maximize your financials before the deadline of 12/31.
1. Max your company retirement plan contributions
Every dollar added to a pretax 401(k) / 403(b) reduces your federal and state income tax liability. A household making over $100k will save nearly 30 cents on taxes for every dollar saved.
2. Give appreciated assets to charity
Charitable donations of cash are generally deductible from income. Donations of stock or property are deductible at full market value, but come with an added benefit: No tax is due on the appreciation.
3. Donate household items to local charities
Donating a working computer, tv, appliance or furniture is deductible. It’s also a great way to declutter before the holidays. If the value is over $250- you’ll need a tax receipt. If it’s less, you won’t.
4. Use your free gifting limits for family
If you’re planning on doing lifetime gifting for tax purposes, you can avoid the 40% gift tax by staying within the annual gift limits. Additionally, giving appreciated assets lets you avoid paying tax on the gain. The limit is $16,000 per person in 2022.
5. Tax losses on investments
If you have losses on stocks or bonds in your investment portfolio, you can sell and lock in a tax loss. Capital losses can be used to either offset gains in the year or deduct up to $3,000 against taxes. Any losses larger than that can be carried forward for future tax years. Mind the short or long-term nature of the holding.
6. Accelerate deductible expenses
Prepaying state taxes or your mortgage in December allows you to deduct against 2022’s income.
7. Defer taxable income or gains
Waiting until January to generate that invoice or realize capital gains can make the associated taxes next year’s problem.