Please ensure Javascript is enabled for purposes of website accessibility

Year-End Tax Planning – 3 Strategies That Could Save You Money On Your Taxes This Year

3 Strategies That Could Save You Money On Your Taxes This Year

It’s almost the end of the year. For those who want to save money on their taxes this year, there are still some year-end tax planning strategies you can look at incorporating by December 31 (if they work for your situation). Here are three tax-reducing strategies for your consideration to see if you can implement them before the end of the year.

Strategy #1: Tax Loss Harvesting

The first strategy for discussion is tax loss harvesting. In years like this, many investors have investments in their portfolios that have lost value over the short and long term. Tax loss harvesting allows you to sell those investments that are down and capture the long-term or short-term capital losses associated with them. Depending on your personal tax situation, these losses can now be used to offset long- or short-term capital gains you owe for this year. They can even be used to offset a percentage of your taxable income.

If you invest the proceeds into different assets, harvesting these losses also offers you a way to eliminate investments that no longer fit your portfolio or your long-term goals or just get rid of investments that may have a low chance of growth. Replacing them with investments that are a better fit for your long-term goals may also give you a better chance of improved performance in the coming years.

Like other strategies used to influence tax liability, tax loss harvesting is a strategy to discuss with your tax professional. They should be able to best analyze your situation and help you optimize your portfolio and tax situation before the end of the year.

Strategy #2: Consider Bundling Medical and Charitable Deductions

Here’s another tax-reduction strategy to consider. You can bundle your medical and or charitable deductions into this year.
If you are expecting a higher income this year, you might consider bundling as MANY future deductions into 2022 as possible to offset that. If you have lab costs, dental, or other medical expenses you can prepay this year, you could pull those deductions forward to the current year for tax purposes. If there are elective procedures you’ve been considering, you could schedule and pay for them before the end of the year.

The same goes for making charitable contributions. If you regularly donate to charities, you might consider increasing your donations this year to reduce taxes. If you plan to donate the money to charity anyway, who wouldn’t rather see their money support a favorite charity instead of paying more in taxes.

Alternatively, this strategy can work in reverse. If you know you will have less income this year and anticipate a higher income next year, you may want to hold off on extra giving or additional medical expenses until the next year when those deductions would be more beneficial to you financially.

Bundling deductions can work for other types of deductions too. As always, check with your tax advisor to see if this strategy will benefit you and how to best use it to improve your situation.

Strategy #3: In a low tax bracket this year? Pick Up Capital Gains

One additional strategy could be a huge benefit if you find yourself in a lower tax bracket for 2022, have a good number of long-term capital gains, and would like to sell or reduce your exposure in those investments.
Most people are familiar with the traditional long-term capital gains tax rates of 15 percent and 20 percent, but many don’t realize there is also a zero percent rate. In order to qualify for the zero percent rate, you need to have a taxable income of $41,675 or below as a single filer or $83,350 or below as a joint filer.
Under this rule, because it uses taxable income, which is income after deductions, it is possible that even someone that makes over $100,000 this year could pay zero percent on long-term capital gains.

If you have capital gains that you want to consider taking this year, ask your tax professional to help you take a closer look to see if you qualify for this opportunity in 2022. With creative use of deductions, you may be able to reduce your long-term capital gains taxes to as low as zero percent for 2022.

These are just three of many strategies that can be deployed before the end of this year to help reduce your taxes. If you have questions that are specific to your family’s situation, feel free to contact us, and we will do what we can to help.

Strategy #3: In a low tax bracket this year? Pick Up Capital Gains

One additional strategy could be a huge benefit if you find yourself in a lower tax bracket for 2022, have a good number of long-term capital gains, and would like to sell or reduce your exposure in those investments.
Most people are familiar with the traditional long-term capital gains tax rates of 15 percent and 20 percent, but many don’t realize there is also a zero percent rate. In order to qualify for the zero percent rate, you need to have a taxable income of $41,675 or below as a single filer or $83,350 or below as a joint filer.
Under this rule, because it uses taxable income, which is income after deductions, it is possible that even someone that makes over $100,000 this year could pay zero percent on long-term capital gains.

If you have capital gains that you want to consider taking this year, ask your tax professional to help you take a closer look to see if you qualify for this opportunity in 2022. With creative use of deductions, you may be able to reduce your long-term capital gains taxes to as low as zero percent for 2022.

These are just three of many strategies that can be deployed before the end of this year to help reduce your taxes. If you have questions that are specific to your family’s situation, feel free to contact us, and we will do what we can to help.

Chris Zeches is a certified financial planner and managing partner at Zeches Wealth Management. Zeches Wealth Management has one singular focus: To financial planning and tax expertise to help multi-generational families and business owners achieve more of what they love.

Have A Question?

If you have questions that are specific to your family’s situation, feel free to contact us and we will do what we can to help.