Tax Refund 2023: Got The End-of-the-Year
Income Tax Checklist Covered?
And although you won't have to submit your 2022 income tax return until late January, you can take some actions now to help you fill out your 1040 form on April 18, 2023.
A great approach to reduce your tax liability and maximize your tax refund is to review your tax situation at the end of the year.
These tax filing strategies can drastically reduce your tax liability, but you must act soon. Some of these steps will require planning and time before December 31, 2022.
Since US income tax is "pay as you go," employers withdraw money from paychecks and independent workers must pay quarterly estimated taxes. Unpaid taxes may result in a penalty.
Your firm uses your W-4 tax form to compute paycheck withholdings. End-of-year W-4 and withholding reviews are fantastic opportunities to improve.
The S&P 500 index is down 20% in 2022, while business prices have barely increased. Stocks struggled this year. Bear markets enable "tax loss harvesting" due to stock losses.
Retirement funds like 401(k)s and IRAs reduce taxes while saving for the future. Make the maximum retirement account contribution before the year ends.
Employers' contributions are excluded from the $20,500 401(k) deduction cap in 2022. By saving, a 24% tax bracket worker might cut their taxable income by over $5,000.
Tax credits affect your tax bill more than deductions. Tax credits reduce IRS taxes instantly, but deductions only impact taxable income.
If you install a
solar power system
, wind turbine, or geothermal heat system before January 1, 2023, you can now receive 26% of the money refunded. The credit drops to 22% the next year.
Medical expenses can be a significant tax deduction for many taxpayers, but the IRS only allows you to deduct expenses that exceed 7.5% of your AGI.