Lesser-Known Ways to Lower Your 2022 Tax Bill or Increase Your Refund

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1. If your income is higher in 2022, carry over your bonus to 2023

If you had a good year and expect lower earnings in 2023, you can try deferring a holiday bonus until the new year, experts say.

“It’s always exciting to reap the rewards of hard work by earning a year-end bonus,” said Lisa Greene-Lewis, CPA and tax expert at TurboTax. “But sometimes it can push you into another tax bracket.”

However, by receiving the money in January, you can reduce 2022 revenue without waiting too long for the funds, assuming your business allows it, she said.

2. Prepay future medical expenses for a deduction

Claiming the medical expense deduction is not easy. For 2022, there is tax relief for unreimbursed medical expenses that exceed 7.5% of your adjusted gross income. But can only claim it if you itemize deductions.

Typically, you’ll detail whether deductions — including charitable donations, medical expenses and more — exceed the standard deduction, which is $12,950 for single filers or $25,900 for married couples filing together. for 2022.

While planning for medical expenses is difficult, you’re more likely to maximize the deduction by “bundling” expenses for two years into one, explained certified financial planner Marguerita Cheng, CEO of Blue Ocean Global Wealth in Gaithersburg. , Maryland.

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For example, with several children wearing braces, you can ask to prepay the remaining balance before the end of the year if you can afford it, she suggested. “The supplier may also offer a discount to pay everything back sooner,” said Cheng, who is also a member of CNBC’s Financial Advisor Council.

Of course, you’ll first need to project your adjusted gross income, total itemized deductions, and account for your previous 2022 medical expenses.

3. “Maximize your support” with a partial Roth conversion

With the S&P 500 Index down about 15% for 2022, you might be considering a Roth Individual Retirement Account Conversion, which transfers pre-tax funds to a Roth IRA for future tax-free growth. The trade-off is that you will have to pay upfront taxes on the converted amount.

The strategy can pay off when the market goes down because you can buy more shares for the same dollar amount, and there is a possibility of tax savings on the converted portion.

However, depending on your income level, you may also consider an annual partial conversion, experts say.

“At the end of the day, if you’re retired or close to retirement and your income is down, then you want to consider filling in enough to maximize your bracket,” Thomas Scanlon, CFP and CPA at Raymond James said at Manchester, Connecticut.

For example, if you’re already in the 24% bracket, there may still be room for more revenue before you trigger 32% on the excess amount, he said.

Scanlon said partial Roth conversions work well for retirees who “have little income and a lot of assets,” such as someone who leaves the workforce several years before they need to start taking the required minimum distributions.

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