2022 Tax Moves to Make Now

2022 Tax Moves to Make Now

Tax Moves to Make Now
Holiday shopping and party planning mean time is growing short to make your year-end 2022 tax moves. While it can be difficult to focus on your finances during this hectic season, these steps can pay dividends in 2023 and beyond.

Maximize Opportunities for Tax-Deferred Growth

401(k)s, IRAs and other retirement accounts are a great way to keep your assets growing tax-deferred. Depending on your employer’s plan, you may be able to defer up to $20,500 in earnings by contributing to a 401(k) or 403(b) plan in 2022. If you will turn 50 before Dec. 31, 2022, and your plan allows it, you can contribute an additional $6,500.

For IRAs, the maximum contribution in 2022 is $6,000 (it increases to $6,500 in 2023), plus a $1,000 “catch-up contribution” for those who turn 50 during either calendar year. You must make 401(k) contributions by the end of the calendar year, but IRAs and some other types of tax-deferred retirement accounts allow you to contribute to your 2022 limit until Apr. 18, 2023.

Do it now and enjoy the benefits of tax deferral and compounded gains sooner rather than later.

Don’t Forget About Required Minimum Distributions (RMDs)

Once you’ve reached age 72, you are required to withdraw a minimum percentage from tax-deferred accounts by Dec. 31 each year. For non-Roth IRAs and 403(b) accounts, you calculate the RMDs separately for each account you own, but you can withdraw the total amount from one or from multiple accounts. It’s up to you.

Unlike IRAs, withdrawals must be taken separately from each 401(k) and 457(b) plan account. Roth IRA accounts are not subject to RMDs. If you forget to take your RMD from your retirement account, you will be assessed a penalty equal to 50% of the amount you should have withdrawn, in addition to your normal income taxes.

Reap the Benefits of Tax-Loss Harvesting

Losses in your portfolio have value, and given this year’s market volatility, some of the shares you own may be underwater. Selling a position below your purchase price isn’t fun, but those losses can be used to offset other gains and income in your portfolio—lowering your tax bill. Selling positions at a loss, waiting 31 days (as per the “wash-sale” rule) and then repurchasing your original position is called tax-loss harvesting. This is something we’ve engaged in on your behalf as a cost-saving aspect of your investment strategy all year, and we’ve again focused on it as December approaches.

Be Charitable

Feeling generous and want to reduce the tax value of your estate? You can give up to $16,000 (or $32,000 as a married couple) to as many people as you want this holiday season without gift-tax implications.

529 college savings plans are another great way to provide gifts to family members. You can even circumvent the annual $16,000 gift limit to fund higher learning by using a special rule called “super funding,” which allows you to contribute up to five times the annual tax-exempted gift limit (up to $80,000) at once without triggering your lifetime gift- or estate-tax exclusion. (You can only “super fund” once every five years.) For a married couple, that super funding could be as much as $160,000, which is certainly a great way to start a newborn on the road to a fully funded private school, college or graduate school education.

For more year-end 2022 tax-saving moves, have a look at our special report, 2022 Year-End Thoughts for Your Portfolio and Personal Life, or just give us a call. We’re ready to help!


Tax and legal information contained herein is general in nature, is provided for informational purposes only, and should not be construed as legal or tax advice.  Personalized tax advice and tax return preparation is available through a separate, written engagement agreement with Adviser Investments Tax Solutions. We do not provide legal advice. Always consult a licensed attorney or tax professional regarding your specific legal or tax situation.

Our statements and opinions are subject to change without notice.  All investments carry risk of loss and there is no guarantee that investment objectives will be achieved.

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