Last Minute Tax Deductions for the 2022 Tax Year
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If you're looking for ways to lower your 2022 tax bill, I've got good news for you! It's not too late.
I've got three ideas to share with you today that might be of help.
The first is considering making a contribution to a traditional IRA and taking a tax deduction for it. There's a few rules and limitations. One is that you can contribute up to $6,000 for the 2022 tax year if you're under age 50, and $7,000 if you're age 50 or older. Be careful, though, because there's also some income limits in place depending on how you're covered by an employer plan. For example, if both spouses are covered by an employer plan, then at the point that your adjusted gross income hits about $109,000, that tax deductible nature of the contribution is going to start phasing out. If only one spouse is covered, then the limit is higher, at about $204,000 for 2022. If neither spouse is covered by an employer plan, then you can always make a tax-deductible contribution to an IRA and it's always going to be deductible for you. Don't forget, if you have a spouse that’s not working, meaning you've got one at home and one working, you can make a contribution for both spouses. As long as that married filing joint tax return has enough income to cover both contributions, and you're still within those limits, then you can actually double up the contribution and get twice the deduction. And hey, you're saving for retirement at the same time.
My second idea is called a SEP IRA, and this is for self-employed people. So, if your income is reported on a Schedule C, you're self-employed, a 1099 contractor, etc., this one's for you. In a SEP IRA, you actually have higher contribution limits than the traditional IRA. For example, it's generally measured as 25% of your contribution. It’s capped at $61,000, so again, lesser of 25% of comp, or $61,000, so quite a bit higher than the traditional IRA. And the good news is, you've got even longer to make a SEP IRA contribution, because you don't have just until the initial filing date of April 18th of 2023. You can go ahead and extend your tax return, which extends the due date all the way to October 15th, and you've got all the way until then to actually open a SEP IRA, if you don't already have one, and make a tax-deductible contribution for the 2022 tax year.
Lastly, the third idea is contributing to a health savings account. You’ve got until April 18th of 2023 to make a HSA contribution and relate it back to the 2022 tax year. The limits for the HSA are $3,650 for an individual, or $7,300 for family coverage, and if you're over age 55, they'll even kick in another thousand dollars on top of those limits. The number one requirement for making a contribution to a health savings account is you need to have participated in a high deductible health insurance plan in 2022. Now I'll be the first to say the rules here are a little nuanced and if you weren't participating in a high deductible health plan for the full year, it’s okay. There are some rules and eligibility that would still let you contribute fully that amount or partially. To be honest, with all three of these ideas, there are eligibility requirements, eligibility nuances, etc. So, what I've done is created a free PDF that you can download that's got the detailed eligibility requirements to see which one of these three ideas, or maybe two or three of the ideas, fit for you.
Click the download link above so you can go look at those eligibility requirements in detail! Hey, why not, right? Again, you've got until April 18th, and these types of deductions are helping you further your financial goals by saving for retirement or adding money for healthcare costs while getting a tax deduction at the same time.