Lesser-known methods to cut back your 2022 tax invoice or increase your refund

In the event you’ve had a robust yr and anticipate decrease earnings in 2023, chances are you’ll attempt to defer a vacation bonus till the brand new yr, consultants say.

“It is all the time thrilling to reap the rewards of laborious work by getting a year-end bonus,” mentioned Lisa Greene-Lewis, a CPA and tax professional with TurboTax. “However generally that will bump you up into one other tax bracket.”

Nonetheless, by receiving the cash in January, chances are you’ll scale back 2022 earnings with out ready too lengthy for the funds, assuming your organization permits it, she mentioned.

It isn’t straightforward to assert the medical expense deduction. For 2022, there is a tax break for unreimbursed medical bills that exceed 7.5% of your adjusted gross earnings. However can solely declare it should you itemize deductions.

Usually, you may itemize if deductions — together with charitable items, medical bills and extra — exceed the usual deduction, which is $12,950 for single filers or $25,900 for married {couples} submitting collectively for 2022.

Whereas it is troublesome to plan for medical bills, you are extra prone to maximize the deduction by “bunching” bills for 2 years into one, defined licensed monetary planner Marguerita Cheng, CEO of Blue Ocean International Wealth in Gaithersburg, Maryland.

For instance, with a number of kids in orthodontic braces, chances are you’ll ask to prepay the remaining stability earlier than year-end should you can afford it, she urged. “The supplier can also present a reduction for paying off all the things sooner,” mentioned Cheng, who’s additionally a member of CNBC’s Monetary Advisor Council. 

In fact, you may must venture your adjusted gross earnings, whole itemized deductions and tally your earlier 2022 medical bills first.

With the S&P 500 Index down round 15% for 2022, chances are you’ll be eyeing a Roth particular person retirement account conversion, which transfers pre-tax funds to a Roth IRA for future tax-free development. The trade-off is you may owe upfront taxes on the transformed quantity.

The technique could repay when the market dips as a result of you should buy extra shares for a similar greenback quantity, and there is a probability for tax financial savings on the transformed portion.

Nonetheless, relying in your earnings degree, you might also think about a partial conversion yearly, consultants say.

“The underside line is if you’re in retirement or close to retirement and your earnings is down, then you definately need to think about filling up sufficient to maximise your bracket,” mentioned Thomas Scanlon, a CFP and CPA at Raymond James in Manchester, Connecticut. 

For instance, should you’re already within the 24% bracket, it is doable there’s nonetheless room for extra earnings earlier than triggering 32% on the surplus quantity, he mentioned. 

Scanlon mentioned partial Roth conversions work properly for retirees who’re “earnings mild and asset heavy,” like somebody who leaves the workforce with a number of years earlier than they’ve to start out taking required minimal distributions.