With the end of the year rapidly approaching, it’s time to start making some year-end tax moves. The actions you take today will impact how much taxes you pay in April. Here are some things you can do to ensure you’re on the right track.
Maximize your 401k contributions
You have until December 31st to try to max out your 401k. For most people, the contribution limit for 2022 is $20,500. However, those age 50 or older can deposit up to $27,000. If you aren’t already contributing the maximum, you’ll need to adjust your withholding. Increasing your contributions will lower your taxable income and can save you money on your tax bill. Even if you can’t afford to max out your 401k, at least contribute enough to receive your employer match because it’s free money. Commonly, they’ll match 50% of whatever you put in, up to 6% of your salary.
Gather your medical and dental bills
If you, your spouse or dependent had costly medical or dental expenses this year, hold on to the receipts. You may be able to deduct a portion of your expenses on your tax return if you itemize. However, you can only deduct the amount that exceeds 7.5% of your adjusted gross income. Deductible expenses include:
- Payments to doctors, dentists, surgeons, chiropractors, psychiatrists, psychologists, and other medical practitioners
- Hospital or residential nursing home care
- Acupuncture treatments or inpatient treatment at a center for alcohol or drug addiction
- Insulin and prescription drugs
- False teeth, reading or prescription eyeglasses, contact lenses, hearing aids, crutches, wheelchairs, and service animals
For a full list of expenses you can or cannot deduct, read IRS Publication 502.
Take your required minimum distributions (RMD)
If you have a traditional IRA, SEP IRA, SIMPLE IRA or an employer sponsored retirement plan, it’s important to know when to start taking your RMD’s to avoid costly penalties. Generally, you must start taking withdrawals from your retirement accounts once you turn 70 ½. However, if your 70th birthday was July 1, 2019 or later, you can wait until age 72 to start taking withdrawals. If you don’t take your required minimum distribution, you’ll pay a 50% excise tax on the amount you were supposed to take.
Check your tax withholding and make necessary adjustments
It’s a good idea to check your withholding whenever there’s a tax law change or you experience a life change such as getting divorced, retiring, having a baby or getting a second job. Use a withholding calculator to see where you stand. Doing a quick check now, can help you avoid a nasty surprise at tax time. If you’re on track to owe money or you want a smaller refund, you can adjust your withholding to try to minimize the situation. But you need to act fast because the end of the year will be here before you know it.
Spend your FSA money so you don’t lose it
If you have an FSA, make sure you use the funds by December 31st or you’ll lose what’s left. You can spend your FSA dollars at retailers like Amazon, CVS, Walmart, Target and the FSA store. Eligible items include feminine hygiene products, contact lenses, antibacterial hand sanitizer, blood pressure monitors and more.
Pre-register with ezTaxReturn.com to save time and money
Most people can do their own taxes using tax software. The fastest and easiest way is with ezTaxReturn.com. And you’ll get the biggest possible refund, guaranteed. Pre-register now to save time and money when you file.
