(News USA) – The new year has just begun, but it’s never too early to review your financial plan in order to reach your financial goals for 2022.
Now is a great time to take steps to reduce your tax liabilities in 2022, according to Dan Mathews, a CERTIFIED FINANCIAL PLANNER™ professional.
Here are five strategies that can reduce your 2022 taxes:
- Maximize your health savings account. Health savings accounts (CHS) are a great way to put money aside and reduce your taxable income. For 2022, you can contribute $3,650 for single coverage and up to $7,300 for family coverage. You don’t have to use the money from these accounts by the end of the year; in fact, the money can be invested to maximize growth until you retire.
- Optimize your 401(k). Most 401(k) retirement plans are tax-deferred, which means you don’t pay taxes on the money you put in, or on the earnings on that money, until you withdraw it. ‘money. Good news for people with employer-sponsored 401(k) plans: contribution limits have increased to $20,500 for 2022, with a catch-up contribution of $6,500 for those age 50 and older. Also consider rebalancing your portfolio this year so that it matches your acceptable level of risk.
- Plan your payments. Individuals who withhold federal tax from their income generally make a tax payment with their annual federal tax return by the mid-April tax deadline, if they have not withheld enough tax for the tax year. But some people, like the self-employed or retirees, may have to pay estimated taxes quarterly. One way to avoid paying penalties when you file your federal tax return is to make sure your 2022 tax payments exceed 90% of your estimated 2022 tax payable. For those making estimated 2022 payments , the main payment due dates are April 18, 2022; June 15, 2022; September 15, 2022; and January 16, 2023.
- Donate your stock to charity. You can gift highly valued stock as a charitable donation in 2022. A gift of valued stock is an itemized tax deduction, and the charity will not have to pay capital gain tax. “You can then buy back the stock with the money you would otherwise have given away, which is an effective way to increase the cost basis of your portfolio,” says Mathews.
- Think long term. Many people overlook estate planning, but making the resolution to create or update a will is a smart strategy for 2022, Mathews points out. Estate planning ensures that your wealth is distributed according to your wishes. This may include charitable donations and considerations for family members. In the short term, you can gift up to $16,000 per person in 2022 to as many people as you want without being subject to gift tax or IRS reporting, he adds.
Working with a CFP® professional can help you get the most out of tax strategies that are right for your situation.
Visit LetsMakeAPlan.org for more information on taxes and other financial planning strategies.