This year is quickly coming to an end. In less than three months we will be celebrating Christmas and then 2023 starts, and along with it, the 2022 Tax Year filing season.

The IRS is expected to announce the beginning of the 2022 Tax Year filing season. Usually, it occurs in the second or third week of January, with the deadline being April 15.

You are still in time to make a dent in the amount of taxes you will owe the IRS, or even reduce them totally and may even be entitled to a refund.

Read on to see what you can do.

TRADITIONAL IRA CONTRIBUTIONS

  • Consider contributing to a Traditional IRA.
  • The 2022 contribution limit is $6,000 ($7,000 if you are age 50 or older. Please see here

for more information.

  • Contributions you make to a traditional IRA may be fully or partially deductible, depending on your filing status and income, and generally, amounts in your traditional IRA (including earnings and gains) are not taxed until you take

a distribution (withdrawal) from your IRA.

This can mean that you can deduct up to $14,000 ($7,000 for you and $7,000 for your spouse) from your Adjusted Gross Income on your 2022 tax return and save yourself the tax due on that amount ($14,000) which can amount to several hundred dollars, or even thousands, depending on your tax bracket.

You can find more information here.

 

CAPITAL GAIN LOSSES

2022 was a bad year for the stock market. If you have any type of investment related to the market, be it stocks, bonds, funds, etc., the chances are that you have steep losses.

If you expect to owe money to the IRS, you might want to consider selling some of your losing assets. You can claim up to $3,000 in Capital Gain losses and deduct this amount from your adjusted gross income. This can save you a few hundred dollars in what you owe to Uncle Sam.

If you have more than $3,000 in capital gains losses, you may carry over the amount over

$3,000 and claim it in future years.

 

EARNED INCOME CREDIT

You might be eligible for a tax credit of almost $7,000, depending on your income, marital status and how the number of children you have.

This means that you will be getting a tax credit, which is a dollar-for-dollar reduction in your actual tax bill, as opposed to a tax deduction. The latter simply decreases how much of your income gets taxed.

If this Earned Income Credit reduces your tax bill below zero, the IRS will send you a refund, depending on the amount of the credit.

You can find more information here.

This blog post was published in the monthly Newsletter for October. It contains a trove of useful information.

It will be free until December 2022, and then by subscription only.

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Thank you for visiting taxandpension.com, and we hope to see you again soon! We look forward to serving you in the future.