Tax-Saving Strategies to Consider
By: James Flippin · December 21, 2022 · Reading Time: 3 minutes
The holidays are just around the corner, which means this year’s tax period is quickly coming to a close. There could be potential ways to lower your 2022 tax bill, but you only have until December 31st to make the necessary moves.
Implementing the following strategies over the coming days could significantly reduce your tax bill or increase the refund that you’ll receive a few months from now.
One potential option to reduce your tax bill is through tax-loss harvesting. This technique allows you to sell investments that are losing money and then use those losses to offset your capital gains. With the S&P 500 down nearly 20% this year, this could be one strategy to help you make the most of a tough year for the stock market.
Even if you don’t have capital gains to offset, you might use this technique to reduce your income by up to $3,000 and carry remaining losses forward to 2023 and beyond.
Another strategy to consider is a Roth conversion. This allows you to move pre-tax funds to a Roth IRA. By doing this when the market is down, you could potentially buy more stock for the same dollar amount while also paying less taxes on the transferred amount.
Finally, another consideration for reducing your 2022 tax bill is to use charitable donations to offset your taxable income. Using a donor-advised fund, you may even have the option to bunch multiple years of donations together in order to maximize your tax savings.
Reducing Your Bill
The holidays can be an expensive time of the year. One underrated way you can recoup some of your expenses is by taking measures to reduce your tax bill. By making strategic money moves now, you might reduce the amount that you need to pay in April or potentially increase the total refund that you’ll receive.
Filing your taxes can be complicated and there isn’t a one-size-fits-all approach. That said, you may want to consider chatting with a tax professional about your individual circumstances to ensure you’re on track to maximize your deductions.
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