Broker Check

There is no such thing as tax “season”

April 04, 2022

For you procrastinators out there, April 18th is the deadline to file your taxes.  I see a lot of articles being written about tax “season” coming to an end.  I completely disagree with that phrase.  Proper financial planning requires year-round attention.  You can not wait until April to decide how you’re going to save money for 2021.  Here I’ll review some areas to focus on, as well as some areas that we work on throughout the year:

  1. Understand any changes that are made to retirement plan contributions.  In 2022, the 401k contribution limit increased $1,000.  The maximum allowed is now $20,500.  If you are turning 50 this year, you also have the option of adding up to a $6,500 “catch-up” contribution for a grand total of $27,000.
  2. Does your company 401K offer a ROTH 401K option? High income earners are typically phased out of allowable ROTH contributions, however, those same income limits are not applied to employer sponsored retirement plans.  It’s important that you get to retirement with multiple tax options when you begin to take income so you can manage your tax bracket more effectively.
  3. HSA’s (Health Savings Accounts) are one of the most tax efficient vehicles we have today. If your company offers a high-deductible plan, then you’re allowed to contribute to an HSA.  These are unique because they are triple-tax advantaged.  They offer deductible contributions, tax free growth and tax-free distributions when used for qualified medical expenses. 
  4. Volatile markets provided opportunities for tax loss harvesting. You can write off up to $3,000 in capital losses every year.  This is something that is constantly monitored in your taxable accounts.  A good tax loss harvesting strategy can leave you with both a positive unrealized gain for the year, yet a write off come tax time.
  5. Use your accountant. If you experience a significant change in income, receive a bonus, have to make a withdrawal from a retirement account etc. you should have your accountant run a projection for you, so you aren’t surprised with a big tax bill when you do file. 
  6. Charitable donations are a great way to support a favorite cause of yours, they can also support your tax filing! SEI offers a wonderful Donor Advised Fund that allows you to make a large contribution, recognize the write off and then work with me to mange and subsequently distribute the funds to your favorite charity or charities.

Like I mentioned at the top, tax “season” is a misnomer.  We should be planning to mitigate your tax bill and taking advantage of opportunities 12 months out of the year.  Go revisit your retirement deferrals and ensure you are taking advantage of all your deductions.  If you manage your own investments, don’t be afraid to cut ties from some losers you have been holding on to.  And, as always, if you have any additional questions about what I mentioned above don’t hesitate to reach out to me.  Feel free to share this.