Preparing Your 2022 Taxes
It’s tax time again, and with so many recent changes to the tax code and the added complexity of the pandemic, it’s more important than ever to get organized and take advantage of the deductions and credits available to you. Here are some tips to help you prepare your 2022 taxes.
- Keep accurate records: Accurate record-keeping is the key to a successful tax return. Be sure to keep receipts, bank statements, and any other documentation related to your income and expenses. This will make it easier for you to itemize deductions and take advantage of tax credits.
- Familiarize yourself with the recent changes in the tax code: The tax code changes frequently, and it’s important to stay up-to-date on any changes that could affect your return. For example, tax brackets have increased for 2022, meaning more income is taxed at a lower rate compared to the year before (1).
- Consider hiring a professional: If you’re feeling overwhelmed by the tax preparation process, consider outsourcing this task to a tax professional. A tax expert can help you navigate the tax code, identify deductions you may have missed, and ensure that your return is filed correctly and on time.
- Plan for estimated tax payments: If you’re self-employed or have significant investment income, you may need to make estimated tax payments throughout the year to avoid an underpayment penalty at tax time. Be sure to consult with a tax professional or use a tax calculator to determine your estimated tax obligation.
- File electronically: Filing your taxes electronically is fast, secure, and convenient. Not only does it eliminate the risk of errors, but it also means you’ll receive your refund faster.
- Take advantage of tax-saving strategies: There are a number of strategies that can help you reduce your tax bill, such as contributing to a retirement account, making energy-efficient home improvements, or using a health savings account. Be sure to research these options and consult with a tax professional to determine which strategies are right for you.
Please note that for some California counties affected by the recent severe storms, the deadline to file has been extended to May 15, 2023. (2)
Some tax-savings strategies that you may be able to take advantage of are:
- Charitable donations: If you make charitable donations, be sure to keep good records of your contributions. You can deduct the fair market value of items you donate to charity, such as clothing and household goods, as well as cash donations up to 60% of your adjusted gross income.
- Medical expenses: Medical expenses can add up quickly, but you may be able to deduct some of these costs on your tax return. Qualified medical expenses that exceed 7.5% of your 2022 adjusted gross income (3) are tax-deductible.
- Retirement contributions: Contributions to a traditional IRA or an employer-sponsored retirement plan, such as a 401(k), can lower your taxable income and help you save for retirement. Keep in mind that if you file taxes as a single person, your Modified Adjusted Gross Income (MAGI) must be under $144,000 for tax year 2022 and under $153,000 for tax year 2023 to contribute to a Roth IRA. If you’re married and file jointly, your MAGI must be under $214,000 for tax year 2022 and $228,000 for tax year 2023(4).
- Business expenses: If you’re self-employed, you can deduct a wide range of business expenses, including the cost of supplies, equipment, and travel. Be sure to keep accurate records of all your business expenses to maximize your deductions.
- Education expenses: If you or a family member are pursuing higher education, you may be eligible for education tax credits or deductions. The American Opportunity Tax Credit, for example, can reduce your tax bill by up to $2,500 per student (5). Be aware that in order to claim the full credit, your modified adjusted gross income must be $80,000 or less (or $160,000 or less for married filing jointly) (6).
By taking advantage of these tax-saving strategies, you can reduce your tax bill and keep more of your hard-earned money. It’s important to remember, however, that every individual’s tax situation is unique, so it’s always a good idea to consult with a tax professional to determine which strategies are right for you.
Preparing for your 2022 taxes doesn’t have to be a daunting task. By taking the time to get organized, stay informed, and make smart decisions, you can save money and ensure your return is filed correctly and on time. If you have questions about the tax-savings strategies we mentioned, please contact us to discuss your situation and what could work best for you.
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Insight Wealth Strategies, LLC (IWS) and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.