8 Year-End Tax Planning Tips


The end of the year is fast approaching. Here are 8 year-end tax planning tips that can hopefully lower your taxes. But be sure to act fast – the cutoff for some of these tactics end well before New Year’s Eve.

1. Review your payroll tax withholding.

If you’re not withholding quite enough, there are still a few pay periods left where you can potentially increase your withholding.

2. Harvest tax losses.

While this year has been a stinker for pretty much every asset class, it does give us the opportunity to harvest tax losses.

If you need to rebalance your accounts, selling at a loss could potentially give you the chance to offset any gains you do have. You can deduct up to $3,000 in losses in any given tax year. Any unused tax losses carry over into future years.

3. Max out your pre-tax savings.

If you aren’t maxing out your 401(k) and HSA accounts, you may be able to increase your pre-tax savings for the year – and lower your taxes. If you’re self-employed, you can make a year-end distribution to your SEP IRA or Solo 401(k). And don’t forget your catch-up contributions if you’re over age 50!

Loading up the boat with pre-tax savings means that you’ll have smaller paychecks for the rest of the year, so you’ll need to make sure you can go without a little extra income for the remainder of the year.

4. Spend what’s left in your FSA.

If you have an FSA, it’s time to “use it or lose it”. Head to the drugstore and load up the cart! Of course, you can always apply FSA funds to glasses as well. You may as well buy another pair!

5. Take your RMD if you haven’t.

If you’re age 72 or older, you’ll need to take your annual required distribution (or RMD) from your tax-deferred retirement accounts if you haven’t already. Don’t wait until the last minute! The penalties for missing this distribution are steep. If you’re charitably inclined, consider applying your RMD amount toward a “qualified charitable distribution” (or QCD). You can give away up to $100,000 this way while saving on taxes.

6. Make Roth IRA conversions, if they make sense.

If your tax bracket is relatively low, consider converting a portion of your IRA into a Roth IRA. Any amount you convert will be taxable, so be sure and discuss this strategy with your financial advisor and CPA.

7. Give to family members.

For 2022, you can give away $16,000 to any one person without having to file a gift tax return. This limit is per person, so a married couple can give up to $32,000 to one individual and vice versa.

You can also use the annual gift tax exclusion amount to fund a 529 plan. In fact, you can “front load” a 529 plan with up to 5 years’ worth of gift exclusion amounts. That’s $80,000 you can invest in a 529 plan that can begin growing tax-deferred now.

8. Give to charity.

While higher standard deductions limit what you’re available to deduct by itemizing, you may still be close enough where some charitable giving makes sense. Of course, it may make sense regardless of the tax impact. It’s the season for giving, right?

If you’ve had a year with unusually high income, you may want to consider opening a donor-advised fund (or DAF). This allows you to make a large charitable donation this year – and take advantage of the tax benefits – while allowing you to make distributions from the fund to your favorite charities in future years.

If you need help with more tax savings tactics like these, then click here to set up a quick, complimentary introduction call to see if Prana Wealth is a good fit. We do still have the capacity to take on new clients.

As a fee-only financial advisor in Atlanta, we can (and do) work virtually with clients all across the U.S. and we’re here to help you when you’re ready.

Prana Wealth Management LLC (“Prana Wealth”) is a registered investment advisor offering advisory services in the State of Georgia and in other jurisdictions where exempted. Registration does not imply a certain level of skill or training. The presence of this website on the Internet shall not be directly or indirectly interpreted as a solicitation of investment advisory services to persons of another jurisdiction unless otherwise permitted by statute. Follow-up or individualized responses to consumers in a particular state by Prana Wealth in the rendering of personalized investment advice for compensation shall not be made without our first complying with jurisdiction requirements or pursuant an applicable state exemption.
All written content on this site is for information purposes only. Opinions expressed herein are solely those of Prana Wealth, unless otherwise specifically cited. Material presented is believed to be from reliable sources and no representations are made by our firm as to other parties’ informational accuracy or completeness. All information or ideas provided should be discussed in detail with an advisor, accountant, or legal counsel prior to implementation.
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