TEMPLE, Texas — This will be the final Money Talks segment of 2022 and we need to talk about year end tax tips and preparing for 2023.
What can you, at home do, to save some money and to improve your tax responsibility for tax season next spring?
First of all, and to kick things off Certified Financial Planner Neil Vannoy says be careful when buying a new mutual fund, telling 6 News, "Most mutual funds pay out capital gains and dividend toward the end of the year, so check for potential distributions before you buy a new fund. The IRS doesn't care how long you've had a fund; you'll be taxed even if you buy it just before the distribution. And since the share prices of funds and stocks drop by the amount they distribute, missing the dividend won't affect your future return."
Your federal tax return allows you to write off up to $10,000 in property taxes, so maybe this is the year to double up and maximize that write off for 2022.
Neil says, "Property tax payments aren't due until the end of January, but you can deduct them this year if you pay them by the end of 2022. But if you expect to be in a higher tax bracket next year, then you could wait until January to pay this year's taxes and then prepay next year's taxes by the end of 2023 in order to double your deduction next year."
And remember you can write off the interest you can pay on your home mortgage, so why not make 13 payments in 2022? Neil agrees telling 6 News, "Paying your January mortgage payment before the end of the year will increase your 2022 mortgage interest deduction by the extra amount of interest you pay in the January payment."
And here at the end of the year, it's always a good idea to fully review your portfolio.
Neil says, "If you have investments in taxable accounts that are worth less than you paid for them, it might make sense to sell them by the end of the year to realize the loss. These losses can be written off against investment gains, and excess losses can be written off against income up to $3,000 then carried over to future years."
And finally if you've made enough this year to be in the tax bracket that you'd prepare for, maybe collect some of the end of year profits you are owed in 2023.
Neil says, "If you have your own business and use the cash method of accounting, you might be able to benefit from waiting until the end of the year to invoice customers, so you don't receive the income – and have to pay taxes on it – until 2023."
The IRS has not yet announced when it will start accepting tax returns in 2023. A reminder that April 15 is a Saturday next year, and Monday April 17 is Emancipation Day, so the deadline to file gets moved to the next business day - Tuesday, April 18, 2023 will be next year’s tax deadline.