Now is a good time to assess your current situation and address those lingering tax moves that may improve your tax picture for 2022. Here are five things to consider:
1. Check on your withholdings. Review your taxable income and the amount of tax you’ve paid to Uncle Sam so far this year. How do the numbers compare to last year? Based on your analysis, you may have to adjust your paycheck withholdings or make estimated tax payments during the balance of the year to avoid underpayment penalties or a surprising tax bill.
2. Build up your retirement accounts. Don’t neglect your retirement savings during the remainder of the year. In fact, setting aside more money for retirement can lower this year’s tax bill. For instance, if you have a 401(k) plan at work, you can defer up to $20,500 of salary in 2022, plus an extra $6,500 if you’re age 50 or older.
3. Identify potential taxable events. It’s easy to overlook one-time events that will have an impact on your 2022 tax liability. For instance, if you win a prize at a church raffle, the prize is generally taxable to you. Perhaps you changed jobs, lost a child as a dependent, or got married. Each of these events can create a change in your tax obligation. Review your records now to avoid any unpleasant tax surprises later.
4. Consider business property needs. If you acquire business property, you can often choose to write off the cost in the first year the property is placed in service under the latest tax laws. If it makes sense, consider combining the benefits of the Section 179 expensing deduction, up to a maximum of $1 million (indexed for inflation), with 100% bonus depreciation for both new and used property.
5. Account for gig taxes. Finally, workers in the gig economy (like Uber and Lyft drivers) should understand the basic tax rules. Generally, income from such jobs is fully taxable, but you may be entitled to offsetting deductions. Essentially, you’re treated like a self-employed individual. Estimated quarterly tax payments are often required for these workers.
Should you wish a review of your situation, call now. It’s better to be prepared than surprised when it comes to your tax obligation.