Last-Minute Tax Tips for 2022

The year is winding down. It’s time to cross these financial planning items off your list before the calendar flips

1. Maximize contributions to retirement savings accounts.

   Depending on your employer’s plan, you may be able to contribute up to $20,500 in tax-deferred earnings to your 401(k) or 403(b) in 2022. If you turn 50 before Dec. 31, and your plan allows it, you can contribute an additional $6,500. For individual retirement accountsA type of account in which funds can be saved and invested without being subject to tax until the account holder reaches retirement age. (IRAs), the maximum contribution in 2022 is $6,000, plus a $1,000 “catch-up contribution” for anyone who turns 50 before year-end. You need to make 401(k) contributions by the end of the calendar year, but IRAs and some other tax-deferred retirement accounts allow you to contribute until April 18, 2023.

2. Consider a Roth IRA conversion.

   A bear marketA period in which stock prices decline significantly from recent highs and remain below previous high marks for weeks or months. Generally, a decline of at least 20% in stock prices is considered the threshold marking the start of a bear market. in stocksA financial instrument giving the holder a proportion of the ownership and earnings of a company. makes Roth conversions more appealing because you pay tax on less money…and watch it grow tax-free after that. The deadline to convert is Dec. 31, and the conversion of after-tax amounts is not included in your gross income.

3. Recognize investment gains or losses.

   You need to sell securities by Dec. 30, the last trading day of 2022, to realize a capital gain or loss for the year. Selling a position at a price below your purchase price means those losses can be used to offset other gains and income in your portfolio—lowering your annual tax bill.

4. Check the expiration.

   Don’t let stock options expire. But remember, exercising nonqualified options results in ordinary income, so keep an eye on how the move will affect your tax bracket. Meanwhile, exercising incentive stockA financial instrument giving the holder a proportion of the ownership and earnings of a company. options could result in an alternative minimum tax liabilityLiabilities are calculated by adding up your existing debts (mortgage, car loans, student loans, credit cards, etc.).. Options can be complex, so it’s important to consult a tax specialist before making a move.

5. Get organized.

   My final tip is a simple one: Gather the statements, receipts and other paperwork you’ll need to complete your 2022 tax return today. This will make life much easier when it comes time to file in 2023, and hopefully it’ll mean you get a refund sooner.