Laurence Hale, AAMS®, CRPS®
Principal/Managing Partner, Investment Advisor & Chief Investment Officer
For some, this year has been full of change, whether in their personal or professional life. For others, 2022 may have been relatively uneventful. Either way, it’s a good idea to review your finances before this year ends.
Changes in your own life (even small ones) along with changes in the 2022 tax code could have a big impact on whether or not you’ll end up owing at tax time. But if you’re proactive, there are things you can do before the year ends to minimize your tax burden.
Here are some of the most common to consider.
(Keep in mind that this article is for informational purposes only and is not a replacement for personalized advice. Please consult your tax, legal and accounting professionals before modifying your tax strategy.)
Can you engage in tax-loss harvesting?
That’s the practice of taking capital losses (selling securities for less than what you first paid for them) to manage capital gains. You might want to consider this move, but it should be made with the guidance of a financial professional you trust.1
In fact, you could even take it a step further. Consider that up to $3,000 of capital losses in excess of capital gains can be deducted from ordinary income, and any remaining capital losses above that amount can be carried forward to offset capital gains in upcoming years.1
Should you itemize or take the standard deduction for 2022?
You may want to take the standard deduction for the 2022 tax year, which has risen to $12,950 for single filers and $25,900 for joint. If you think it might be better for you to itemize, now would be a good time to gather the receipts and assorted paperwork, and share them with your tax professional for guidance.2
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Are you thinking of gifting?
If you’re likely to owe taxes, you could instead make a charitable gift before the end of the year instead. Donations to a qualified charity or non-profit organization may qualify as a tax deduction. (But be aware that for some gifts, you may be required to itemize deductions using Schedule A).3
While we’re on the topic of giving, it’s also a good idea to review a portion of your estate strategy at this time. Specifically, take a look at your beneficiary designations. If you haven’t reviewed these designations for some time, double check to see that these assets and accounts are structured to go where you want them to go in the event that you pass away. Lastly, look at your will to make sure it is still valid and up-to-date.
Do you need to adjust your withholding?
Check on the amount you have withheld from your paycheck. If you discover that you have withheld too little on your W-4 form so far this year, you can adjust the withholding in order to cover your expected tax burden before the year ends. Yes, this will result in a smaller paycheck, but it’s better than being surprised with a big tax bill in April.
What else can you do before ringing in the New Year?
You might be eager to ring in a new year but you should consider speaking with a financial or tax professional well before New Year’s Eve arrives. Doing so now, rather than in February or March, might help you improve your short-term financial situation.
At the same time, take this opportunity to address your long-term financial health as well. Just as being proactive at year’s end will save you both anxiety and money at tax time, working with a financial advisor who is also a fiduciary to put a strategy in place for achieving the future you envision will do the same for years to come.
At Weiss, Hale & Zahansky Strategic Financial Advisors we use our Plan Well, Invest Well, Live Well strategic financial planning process to help our clients to do just that. Contact us to get started.
Presented by by Principal/Managing Partner Laurence Hale AAMS, CRPS®. Securities and advisory services offered through Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. These materials are general in nature and do not address your specific situation. For your specific investment needs, please discuss your individual circumstances with your representative. Weiss, Hale & Zahansky Strategic Wealth Advisors does not provide tax or legal advice, and nothing in the accompanying pages should be construed as specific tax or legal advice. 697 Pomfret Street, Pomfret Center, CT 06259, 860-928-2341. www.whzwealth.com.