Once January 1 rolls around, you generally lose the ability to make any changes or elections that can impact the tax return for your previous year. Therefore, you must make any moves prior to the end of the year to put you in a better position when you file taxes. Otherwise, you can be hit with a large bill unnecessarily on tax day.
Your ending income for the year can significantly impact your taxes. It can put you in a higher tax bracket or make you subject to the alternative minimum tax. Many taxpayers are hit with the surprise that their income makes them subject to the AMT, and they only learn it in the following year. You should consider ways of reducing your income in the current year or deferring it to the next year. One way to reduce taxable income and invest at the same time is to maximize your contribution to your retirement accounts. For 2022, you can contribute up to $20,500 to your retirement accounts.
On the other side of the ledger, you can also act to maximize your deductions before the end of the year. You may consider locking in capital losses by selling stocks that have decreased in value. If you have capital gains, you may want to offset them by selling a stock on which you have lost money. Many people also step up their charitable donations before the end of the year to take a deduction. You should also do a search for last-minute deductions, so you are not leaving money on the table.
Contact a San Francisco Tax Attorney Today
At Diosdi Ching & Liu, LLP, we help both businesses and individuals with tax-related issues. To get tax advice for the end of the year, send us a message online or call us today at 833.829.4376.