10 year-end tax-planning tips for your 2022 taxes 


As we near the end of 2022, consider upcoming tax deadlines and opportunities that could significantly affect your tax bill. Although there have been few tax law changes this year, many individuals may have experienced life changes that could affect their taxes.

Consider these 10 tax-planning and preparation moves before year-end.

1. Talk to your tax, wealth and insurance advisors about life changes

Your tax obligations and opportunities to reduce your tax burden may be affected by a wide range of changes in your life. Many people don’t realize how certain changes may affect their tax situation. In addition, many of these changes can lead to changes in your estate planning.

Here are a few life changes to discuss with your advisors:

  • Moving to a new home
  • Divorce or marriage
  • Children who entered your life (by birth, adoption, marriage, etc.), started college, moved out of your home, moved back into your home or married/divorced
  • Death of a spouse or dependents
  • Inheritance or significant gifts of any type
  • Sale or purchase of any major assets, including property, securities and businesses
  • Employment changes, such as a new job, significant promotion or becoming self-employed
  • Buying or leasing a new electric vehicle (some related tax credits are sunsetting, but others might kick in)
  • Having student loan or other debt forgiven, or taking on new debt

2. Don’t forget about disaster claims

If you were affected by Hurricane Ian or other natural disasters this year, let your tax professional know about the scope and cost, even if you don’t yet have complete information. If your property is in a Federally Declared Disaster area, you may be able to claim the losses not covered by insurance on your 2021 or 2022 tax return. Under the right circumstances, it may make sense to amend your 2021 tax return to possibly obtain a refund more quickly.

3. Consider where you’re spending your time

If you spent a significant amount of time in a different state or country this year, your tax bill may be affected. This includes time spent on vacation, working remotely, on assignment for an employer, living in a second home and more.

Higher-tax states may examine the number of days you lived in a lower-tax state to establish a tax domicile, which could possibly create an income tax obligation. Time spent outside the U.S. could lead to changes in your tax obligations, both domestically and in those countries.

Spending too much time in certain locations might establish an unwanted tax requirement. Sometimes, the number of days you spend in a particular place between now and the end of the year, as well as the activities you engage in, can make a significant difference in your tax situation. Your tax professional can help you understand your options as part of the year-end tax planning process.

4. If you haven’t already done so, finish your 2021 tax filing

On November 26, 2022, the IRS is planning to shut down its e-file system until sometime next year. If you still need to finish your 2021 filing, do so before then, or you’ll have to file on paper – a recipe for a much slower tax refund, potential lost filings and other delays.

If your tax professional is waiting for information or documentation from you, provide it as soon as possible. Even if you think you’ve provided everything that’s needed, it’s a good idea to pro-actively check in with your professional to confirm your filing is on track and there is no additional information they need.

5. Consider moves that take advantage of dropping asset values

Discuss with your tax professional whether you should use capital losses to offset realized gains into a particularly timely question with the stock market’s shaky performance. You might also consider tax loss harvesting: selling marketable securities whose value is down to offset gains in other assets. Also discuss whether you might benefit by rolling capital gains into a Qualified Opportunity Fund, which allows you to defer or reduce your tax liability with investments in targeted locations and companies.

Your tax advisor can provide guidance on whether now is the right time to make moves that you might have put on hold because of concerns about their tax impact, such as converting traditional IRAs to Roths or selling securities. Roth IRA conversions are taxed at the value when you convert them, so lower portfolio values mean less taxes.

High-income earners can’t contribute to a Roth IRA once they reach a certain threshold (up to $144,000 for individual filers), but traditional IRAs don’t have a ceiling. This can make conversions a helpful strategy. This “backdoor Roth” strategy is still available, although lawmakers have discussed closing it off in the future.

Finally, discuss with your tax professional any asset location strategies to implement before year-end. Depending on your situation, this may include placing tax-inefficient assets in a tax-deferred account; stocks and other tax-preferential assets in a taxable account; and assets with the highest expected return in a Roth account.

6. Defer compensation or income and/or maximize tax-deferred retirement contributions

You may have the ability to reduce this year’s tax burden by deferring certain types of income until 2023. This may include deferring receipt of salary, bonuses, some types of commission, or proceeds from real estate or business sales until 2023. Generally, deferring receipt of the income payment can defer the tax payment obligation.

Another consideration in deferring tax obligations is to maximize retirement plan contributions. The 2022 401(k) tax contribution limit is $20,500 for those under age 50 and $27,000 for those 50 and older. Self-employed individuals can also make employer contributions, up to $61,000, or $67,500 for those 50 and over.

If you own a qualified business, consider deferring business income, making deductible retirement plan contributions, and maximizing your qualified business income (QBI) deduction, in order to optimize your tax situation.

7. Evaluate your estate, trust and gifting strategies

The current lifetime gift and estate exemption for individuals lets you transfer $12.06 million to heirs free of federal gift/estate taxes, and the exemption is scheduled to increase to $12.92 million in 2023. Further inflationary increases are likely to follow in 2024 and 2025. However, the exemption is slated to be cut in half starting in 2026, so it might make sense to pass assets to heirs now, while the exemption remains high.

Consider whether your gifts should include transfers to 529 plans if you have children, grandchildren or other relatives whose education you want to help fund. Withdrawals from these plans can pay for undergraduate, graduate and some K-12 education, as well as a host of education-related expenses, and earnings inside the plans aren’t taxed as long as the funds are used to pay those expenses. Contributions to 529 plans qualify for the annual gift tax exclusion – $16,000 per donee (for each donor) in 2022 and increasing to $17,000 per donee in 2023 – and you can front-load up to five years’ worth of contributions without diminishing the lifetime gift and estate tax exemption.

Finally, meet with your estate and trust professionals to review your estate plan and determine if it meets your current needs. Updates to consider may include provisions for beneficiaries, as well as appointments of trustees and other agents.

8. Check in on your charitable giving strategy

The tumultuous year means charitable organizations are in greater need of contributions. If charitable giving is in your plans, check in with your tax advisor before year-end to be sure you meet your charitable contribution goals. Additionally, some long-term donation strategies can be optimized in our current financial climate of rising interest rates.

If you don’t itemize, it could make sense to “bundle” your giving, such as by making larger gifts every other year, or making a gift twice in one year, then skipping the next year. This strategy may make it possible for you to itemize deductions in the years when you give to charities.

If you must take required minimum distributions (RMDs) from retirement accounts, explore whether it makes sense to donate these funds as a qualified charitable distribution and therefore exclude that money from your taxable income. There limits and restrictions, so discuss this with your tax advisor.

9. Prepare for IRS delays

The IRS is still experiencing significant backlogs and delays, so factor wait time into the tax filing process. Taxpayers and professionals are spending a lot of time waiting on hold, as the IRS works through a backlog from 2021 and prior tax years. Filing early, using electronic filing, and choosing direct deposit will increase your chances of a faster refund or resolution of any tax obligation.

Ongoing tax situations merit close monitoring and extra communication with your tax professional. Follow up on refunds expected to cover required estimated payments, as these may not have been processed yet. And discuss with your tax advisor if there are ways you can minimize the ramifications of IRS delays.

10. Reach out to your tax professional

Good communication with your advisors and proactive tax planning are the best ways to set yourself up for a smooth tax-filing process.

If you receive any communication that appears to have come from the IRS, share it with your tax professional before taking any action. The IRS will never request personal or financial information from you by email, text, social media or phone. The IRS will also never ask for your identity protection PIN or call to threaten you with legal action. These are common methods of taxpayer ID theft and IRS overpayment theft, both of which are growing issues.

In cases where the IRS is trying to contact you, your professional can help you respond effectively and better understand your situation.

Recent legislation will increase IRS funding and result in stepped-up enforcement for high-net-worth taxpayers, including more IRS notices.

In addition to the tax planning tips listed above, there may be other moves you should make before year-end. Keeping in touch with your tax professional will let you respond quickly to any changes, including any new tax legislation Congress may introduce after the November 8th election.

Contact the Kaufman Rossin tax advisory team as soon as possible to discuss year-end tax planning and make any adjustments you may need to prepare for a surprise-free tax season.

Claudia Sotolongo Gonzalez, CPA, is a Tax Associate Principal at Kaufman Rossin, one of the Top 100 CPA and advisory firms in the U.S.

Scott Goldberger, JD, is a Estate & Trust Principal at Kaufman Rossin, one of the Top 100 CPA and advisory firms in the U.S.

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