Steps to Make End of Year Less Taxing
The end of the year is fast approaching, and the holiday season is here! While it’s easy to push things off until the last minute, now is a good time to review your current financial records and take advantage of any last-minute tax savings. Also consider other steps you can take now – during Giving Season – to start the new year on the right financial foot.
The Giving Season
There’s a reason why it’s called the season of giving. You may have individuals in your life that you want to gift with no tax consequences. You can gift up to 2021 annual tax limit of $15,000 per recipient ($16,000 for 2022). Maybe it’s for a down payment on a house, or future college education fund for your grandkids.
The Giving Year
2021, marred by a pandemic, has truly been the year of giving. The Consolidated Appropriations Act, which passed on December 27, 2020, expanded on the CARES Act, and now allows individuals, who itemize, to apply up to 100% (up from 60% in 2020) of their adjusted gross income for 2021 on cash gifts made to qualifying charitable organizations. Donate to a public charity since most private foundations will not qualify.*
Maximize Your 401K Contributions
Thinking about adding more funds to your 401K account? How about increasing your contributions next year? A little goes a long way. For 2022, your individual 401(k) contribution limit increases to $20,500, up from $19,500, or $27,000 if you’re age 50 or older. Consider applying the maximum amounts to your 401K through your employer if your financial situation allows you to. You’ll boost your retirement savings and avoid paying income tax on the contributions.
Review Your Withholdings
If you haven’t recently reviewed your federal tax withholding, now is a good time. Use the IRS tax calculator to make sure the proper amount of tax is being held from your paycheck. Feel free to reach out to your planner if you have specific questions.
Planning Your Next Goal in 2022
Perhaps you would like to buy a new home, take that long overdue trip to Europe, or purchase an investment property. Whatever your goals are, our financial planners can help you devise a strategy to achieve your goals and find ways to reduce your tax liability. Let’s plan it, so you can live it!
Written By Vivian Le Cousins