Consider these smart strategies to lower your tax bill for 2022

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Tax withholding review

In fact, you can be pretty intimidating when you’re working three to four or five different jobs.

John Schultz

Partner at Genske, Mulder & Company

And don’t forget to consider whether you’ve paid enough federal taxes to cover other sources of income, such as earnings and interest from investments.

Now that you have all this capital gains, that is income that will not be subject to withholding,” said Collado, a certified financial auditor and certified financial planner. “So that difference in tax needs to be offset either with an additional withholding or quarterly discretionary tax payments.”

You can still adjust your withholding and make an estimated fourth-quarter payment if you have very few taxes withholding. Financial advisors say that if you have a lot of withholding taxes this year, reducing the withholding now could increase your paycheck, giving you the extra cash flow you might need in this inflationary environment.

Get online to Tax withholding estimator at the IRS at IRS.gov to see if you’re on the right track. If you need to make some changes, it will tell you exactly what you need to do to fill out a new W-4 form. Then, send this form to the employer.

Increase your 401(k) contributions

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If you have room in your budget, consider boosting pre-tax retirement savings into your 401(k) or workplace retirement plan. Putting money in these accounts lowers your gross income, so you pay less tax on your gross income.

You have until December 31 to make 401(k) plan contributions for 2022. You can store up to $20,500 this year in your 401(k). Add an additional $6,500 if you are 50 or older for a total of $27,000.

Financial advisors say that even if you don’t have the budget to save roughly that amount, increase your 401(k) contributions at least enough to get the matching contribution from your employer. This is free money, after all.

Weight Conversions Roth IRA

The stock market slide since the beginning of the year gives you a chance to save on taxes in the future by using a strategy called Roth IRA transfers. Here’s how it works:

If you have a pre-tax IRA or an individual retirement account, you can transfer some or all of that money to a Roth IRA. By transferring money to a Roth account, you’ll get tax-free growth in the future – but you’ll have to pay taxes up front on the amount transferred.

How to take advantage of a market downturn to start a Roth IRA تحويل

The S&P 500 . Index It’s down more than 20% so far this year, so you won’t pay taxes on transferring those assets as you would a few months ago — that’s another bit of tax savings. For example, let’s say you have $50,000 invested in a pre-tax IRA and it is now $40,000. You’ll save on taxes because you’ll transfer $40,000 instead of the original $50,000.

Just make sure you have enough money outside the IRA to pay those taxes. You don’t want to indulge in retirement accounts to pay for it.

Consider “Tax Loss Harvest”

Many financial advisors talk about a common strategy when trying to find a positive side after a sharp slide in stocks and that is “tax loss harvesting”.

If you sell an investment at a loss, you can subtract that loss from any capital gains you got from selling other investments. By doing this, you can reduce your taxes. These losses or gains can be from stocks, real estate and other types of property.

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