By Mark Ziety, CFP®, AIF®, Senior Advisor, WisMed Financial
Tax laws feel like stepping into quicksand lately, don’t they? Trying to understand if, when and how the tax laws will change can make you feel like the floor will fall out from under you at any moment. (Particularly at tax time.)
This is especially true if you’re a high earner or have accumulated a significant nest egg. With each tax change, it feels like your tax-saving strategy is in jeopardy. However, we are in familiar waters because the tax laws have evolved constantly. In the past 20 years alone, the wealthiest taxpayers’ top marginal tax rate has shifted between 35% and 39.6%.
It sounds all doom and gloom, but it’s possible to find tax-saving opportunities hiding inside your current strategy and every new tax law update.
With your 2021 tax return in hand, it’s time to start planning your 2022 tax strategy by checking some important lines on your 1040 or 1040-SR. Things to consider:
- Lines 2b and 3b show dividends and interest that are adding to your current tax bill. Should you hold these investments in a tax deferred account?
- Was line 4b exactly $6,000 or $12,000? If so, your backdoor Roth IRA contribution(s) was probably not reported correctly.
- Did you have realized capital gains that may have added to your tax? Check line 7 to find out. If your capital gain tax rate is low, consider whether you should realize additional capital gains in 2022 or defer them to a future year.
- Did your deductions help you? If line 12a is $12,550, $14,250, $18,800, $25,100, or $27,800 you did not get a deduction. Consider bunching multiple years of deductions into a single tax year so you can itemize deductions.
US Senators still intend to pass portions of last year’s failed Build Back Better Act in 2022, so the timing of property tax payments, additional tax deferral, and Roth conversions are all strategies that should be considered this year.
Want help with your tax strategy? Download WisMed Financial’s free tax planning guide or schedule an appoinment.
P.S. Download the 2022 tax brackets, retirement contribution limits, investment checklist, and quick decision flow charts from the new WisMed Mobile app.
To your best life and healthy finances.
Mark Ziety, CFP®, AIF® 608.442.3750.
WisMed Financial, Inc. part of the Wisconsin Medical Society