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YEAR-END TAX TIPS TO HELP PLAN FOR 2022 BY ANTHONY GARZILLI
The new year is around the corner, but there’s time to maximize your money before the end of 2021. There are myriad ways you can reduce taxes you owe and plan for the future. From charitable donations to contributing to your 401K plans, now may be the time to think about taxsaving tips. Thomas Dowling, head of wealth management with Alliance Global Partners, and Jenn Sokolowski, financial planner and relationship manager at Metis Wealth Management and Planning, offered some advice. CONTRIBUTE TO A HEALTH SAVINGS ACCOUNT PLAN: This is a tax-advantaged account used to pay for current and future medical expenses. You contribute pre-tax money, the funds grow tax deferred, and when used for qualified medical expenses, the money is withdrawn tax free. If you are enrolled in a high-deductible health plan you can contribute up to $3,600 for an individual and $7,200 for a family in 2021 (if you are older than 55, you can contribute an additional $1,000). Contributions can be made up to the federal tax return due date (April 15, 2022). MAXIMIZE YOUR IRA OR 401K PLAN CONTRIBUTION: You can contribute up to $19,500 for 401K plans and $6,000 for IRAs in 2021 (plus catch-up contributions of $6,500 for 401K plans and $1,000 for IRAs). Dowling, CFA, CFP(r),
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CIMA(r), said not to forget that you can increase the amount you contribute to your 401K plan in 2022 to $20,500 (an increase from 2021). IRA contributions will stay the same as 2021. 401K contributions must be made by Dec 31. IRA contributions can be made by April 15, 2022. Additionally, Sokolowski said, people ages 70 ½ and older are eligible to take qualified charitable distributions from an IRA. QCDs are distributions from an IRA directly to a charity. They are popular, she said, because the distributions are excluded from the taxpayer’s income and they count toward satisfying required minimum distributions for those over age 72. Distributions can be made to as many charities as you like. MAKE A CHARITABLE CONTRIBUTION: This is a great way to help the charities you care about and reduce the taxes you owe, Sokolowski said. Consider “bunching” donations together: make several years of donations in one year to maximize your tax benefit. The CARES Act provided some temporary tax benefits for charitable contributions. Qualified contributions up to 100% of adjusted gross income can be deducted for 2021 if you itemize. The contribution must be a cash gift and must be made in 2021 to qualify. Typically, only 60% of AGI can be deducted for cash gifts. There is an opportunity for non-itemizers to take a charitable deduction. Cash donations of up to $600 for married couples ($300 for
