3 ways to lower your 2022 tax bill or boost your refund

The tax deadline is approaching, and there are nonetheless a couple of methods to scale back your 2022 invoice or enhance your refund, specialists say.

As soon as the calendar yr ends, “the toolbox of choices is way smaller,” stated licensed monetary planner and enrolled agent John Loyd, proprietor at The Wealth Planner in Fort Price, Texas.

Nevertheless, there are a couple of last-minute strikes to think about earlier than the federal tax-filing deadline, which is April 18 for many Individuals.

Tommy Lucas, a CFP and enrolled agent at Moisand Fitzgerald Tamayo in Orlando, Florida, stated pretax particular person retirement account contributions are the primary possibility to think about.

You may make pretax IRA deposits for 2022 by way of the federal tax submitting deadline, which can provide a deduction to scale back your adjusted gross earnings. Roth IRAs present tax-free development with out the upfront deduction.

The IRA contribution restrict is $6,000 for 2022, with $1,000 extra for traders age 50 and older, and eligibility for the deduction depends upon your office plan participation and earnings. 

Nevertheless, you have to think about greater than the present yr’s tax break earlier than making pretax IRA contributions, Lucas stated. 

“Usually, in case you’re within the 10% or 12% [tax] bracket, you are in all probability higher placing cash into the Roth IRA,” he stated. However in case you anticipate larger earnings in retirement, you might skip the upfront deduction for tax-free withdrawals sooner or later.

Married {couples} submitting taxes collectively might also think about a lesser-known possibility earlier than the tax-filing deadline: spousal IRA deposits.

IRA contributions require “earned earnings,” resembling wages from a job or self-employment earnings. However Loyd stated spousal IRAs permit each companions to contribute to separate accounts based mostly on one partner’s earnings. “It is undoubtedly a shock for purchasers,” he stated.

For instance, if one partner would not work outdoors the house or retires early, they will nonetheless contribute to their very own IRA, so long as their associate has earned earnings.

For 2022, you can also make whole contributions of as much as $12,000 or $14,000, so long as one partner had at the very least that a lot taxable earnings. Collectively, annual spousal IRA deposits cannot exceed joint taxable earnings or two instances the yearly IRA restrict.

One other approach to rating a deduction earlier than the tax submitting deadline is by contributing to your well being financial savings account, or HSA — offered you had eligible high-deductible medical health insurance in 2022.

These accounts provide three tax advantages: an upfront deduction for contributions, tax-free earnings and tax-free withdrawals for certified medical bills.

“That is a simple one, particularly in case you weren’t making contributions by way of your employer,” Lucas stated.

For 2022, the HSA contribution restrict for people is $3,650 and households can deposit as much as $7,300, which qualifies for a deduction to scale back adjusted gross earnings.