Conn. (WTNH) — As 2022 draws to a close, it’s a good time to take a look at some last-minute ways to reduce what you’ll owe Uncle Sam come April.
If you’re looking to save some money on your 2022 tax bill, boosting your retirement savings could offer some big tax benefits. Contributions to your 401K come out of your paycheck before income taxes are deducted, which lowers your tax bill for the year.
Kimberly Washington, tax analyst at Forbes Advisor, noted that you can contribute up to $20,500 for 2022.
If you’re over the age of 50, you can make a catch-up contribution of $6,500 for the year. Additionally, there may be another benefit to depositing money into your 401K. Washington said that your employer can also match some of the money that you put into your retirement account.
Another way to save for retirement is with an IRA. There are several different types available, with contributions coming from either pre-tax or after-tax dollars.
“You can, of course, put up to $6,000 into this account,” Washington said. “You still have some more time to give or put money into those accounts because you don’t have to do so until April 18 of next year, which is the tax deadline.”
It’s also important to remember to check the balance in your flexible spending account. Pre-tax money deposited in these FSAs can be used for healthcare expenses that are not covered by insurance.
“You definitely want to spend down your account because of course, you may lose it after 12/31,” Washington said. “So check those account balances and make certain that you have money available.”
During the holidays, many people find themselves in the giving spirit, and making those charitable donations can give you an added deduction.
Washington said it has to be a tax-exempt organization to qualify, so be sure to check that if it’s the tax break you’re looking for. Also, make a list of all the documents you’ll need, that way you’ll be organized when it’s time to file your 2022 taxes.