Your taxes are done! Congratulations on making it another year. What are you doing to celebrate tax day 2022?
Upon reviewing your actions from last year, were there some things that you could have done differently so you didn’t have to pay so much money to the IRS? Do you wish that you knew before making these decisions?
Paid Too Much?
You may be passing off a lot of self-judgment and be angry at yourself for a higher tax bill than necessary. If this is the case, hindsight can be very beneficial because you can use this knowledge to make better tax decisions this year. Remember as Bob Ross used to say, “We don’t make mistakes, we have happy accidents.”
There’s not a whole lot that you can do given the books are closed for last year and today is the last day to file taxes. However, it’s important to remember that there are actions you can take in 2023 to reduce your tax burden next April.
Reduce Your Payment on Tax Day
Everyone’s situation is unique, but here are some ideas to reduce your taxes.
First, max out your 401(k) savings to reduce your taxable income. In 2023, the most that you can contribute to your 401(k) is $22,500, if you are younger than 50. For those over 50, the annual contribution limit is $29,000. These contributions do not include an employer match.
Second, set up a Health Savings Account (HSA) if you have a high deductible health insurance plan. You can put aside up to $3,850 for yourself and $7,750 for your family for medical expenses. If you are over 55, you can set aside an additional $1,000.
Third, if you have vested RSUs, you can donate them to a qualified charity. The amount of the donation will lower your income. When you have a large amount of vested RSUs in a given year that move you into a higher tax bracket, this can be a wonderful option.
There are many other techniques to reduce your levy and these actions are dependent on your circumstances. If you would like to talk specifics about organizing your tax situation for next year it’s best to consult with a tax professional and a Certified Financial Planner. Feel free to set up a free consultation and pay lower taxes during next year’s tax day.