Dan Caplinger, Colorful Fool,
Thanksgiving is here, and before you know it, it’s time to start planning parties for New Year’s Eve. But with holiday shopping, planning family trips, and everything else that comes with the holiday season, it’s important to get your tax planning done before December ends.
There are a few things that must be done, especially by December 31st. Otherwise, you could miss out on valuable tax breaks and even more unexpected surprises. Below you’ll find three tax-related moves over the next few weeks.
1. Make the required minimum distribution from retirement accounts
Those 72 and older should typically start receiving money from traditional IRAs, as well as 401(k) or similar employer-sponsored retirement accounts. Additionally, those who inherit IRAs and have annual withdrawals that extend over their projected lifespan also have minimum amounts they must withdraw each year. These mandatory withdrawals are known as required minimum distributions. Calculating the amount involves looking at the balance of your retirement accounts at the beginning of the year and applying a life expectancy factor to determine the fraction of the balance you need to withdraw.
People also read…
For most people, these RMDs need to be removed from their retirement accounts by December 31. There is a one-time exemption for those who turn 72 during the year because they will be able to delay receiving their first RMD until April 1. the following year. If you miss your RMD, the IRS can impose a massive 50% penalty on the RMD amount, so you won’t want to forget it.
2. Collect your tax losses
2022 has been a tough year for stock market investors, and many have lost money positions. To claim tax loss on these investments, you must sell your shares by the end of the calendar year. This will create a capital loss that you can use as a tax advantage.
You can use capital losses to offset an unlimited amount of capital gains in the same year. Additionally, if you have any remaining capital losses, you can use up to $3,000 per year against other types of income, including interest and dividends, wages and annuities, and taxable retirement plan withdrawals. If you have more losses remaining, you can roll over any amount above $3,000 to use in future tax years.
3. Increase contributions to 401(k)s or other employer-sponsored plans
Finally, a great way to reduce your taxable income is to take advantage of tax-advantaged retirement accounts. With IRAs, you have until mid-April next year to contribute. However, for 401(k)s and other employer-sponsored plans, there is no grace period until early 2023. If you want to increase your contributions, you must receive the extra money by December 31st.
Working with your HR department will give you the best chance to seamlessly increase your contribution. Also, if you want to make a temporary increase but go back to the old practice when 2023 starts, you will definitely want to coordinate with your payroll workers to avoid any mistakes.
It’s usually a good idea not to wait until the last minute to make these tax moves. That way, if there are any delays due to the holidays, you won’t find yourself struggling and possibly missing out. Taxes may not be the first thing on your mind as 2022 comes to an end, but taking some time off for tax planning now will pay off in the new year.
Federal Deposit Insurance Corp.’s unbanked and…
No one knows for sure when—or if—student loan forgiveness will come. From now on, you must schedule payments on your federal student loans to continue…
November 2022: Do you know where your cryptocurrency is? After the collapse of the FTX exchange this month, it’s a good time for anyone who owns cryptocurrencies.
Acquiring new customers is a top concern for most small business owners, and the solution may be in their hands. One of the most important social media…
FTX, a major cryptocurrency exchange, was on the verge of collapse this week amid liquidity concerns and allegations of misappropriation of funds, with massive withdrawals from cryptocurrency exchanges that were subsequently shaken.
Vacation is synonymous with spending. With a little planning, savvy consumers can earn bonus miles, points or cash back this holiday season.
The world’s largest online shopping holiday is one that many Americans have never heard of. It’s called Singles’ Day, and it’s a Chinese shopping holiday that has grown from day one…
Personal loan rates from banks, credit unions and online lenders have soared after the Federal Reserve repeatedly increased interest rates this year, the last of which came last week.
Customers who fill their carts this holiday season will likely have a “buy now, pay later” option at checkout. Known as BNPL for short, these payment plans are…
A Roth IRA can be an attractive retirement account for any type of investor. One reason is that Roth IRAs can help you save on taxes, especially…
Your student loans are forgiven, you got a gift or extra cash this month, it’s now possible to use $100 or less to start your investment journey…
I recently borrowed a friend’s 25-year-old BMW for a long trip. Every time I geared up, I missed the lack of a backup camera. And that wasn’t all.…
10 stocks we love better than Walmart
When our team of award-winning analysts have an investment tip, it can pay to listen. After all, the newsletter they’ve been running for over a decade, Colorful Stock Advisortripled the market*
They just declared what they believed top ten stocks for investors to buy now… and Walmart wasn’t one of them! That’s right – they think these 10 stocks are better buys.
see 10 stocks
Stock Advisor returns as of October 26, 2022
The Motley Fool has a disclosure policy.