Tax Planning for 2022

Now that you have filed your taxes for 2021, it is time for tax planning for 2022. Tax planning is the process of gaining the latest tax information and taking the necessary actions to delay or avoid paying unnecessary taxes. Effective tax planning enables you to take full advantage of tax law provisions, credits and deductions, and tax breaks. Unlike your tax return, you can work on tax planning throughout the year. The time to start is now.
The Problem
Whether you are a business owner or employee, tax planning for 2022 will likely be more challenging than in past years, as uncertainty surrounds the possibility of changes in tax policies. Although Biden’s proposed reforms fell apart before the new year, issues like inflation, supply chain disruption, and rising interest rates could cause tax implications. Despite the unpredictability, reliable income, estate, and business tax planning opportunities continue to exist.
Considerations for Individuals
• Maximize your 401(K) contributions.
• If you are planning to sell appreciated assets, consider offsetting the gains by selling investments that carry losses.
• Consider converting to a Roth IRA if you are eligible, especially if you expect to be in a lower income bracket this year.
• If you plan to itemize, you might instead choose to take the standard deduction this year and itemize next year by bunching charitable contributions for this year with 2023, and postponing large medical expenditures to next year, if you can
Considerations for Small Businesses
• Chance your business structure. A different business structure could improve your tax situation.
• Make purchases of new equipment this year to take advantage of the Tax Cuts and Jobs Act (TCJA) 100 percent first-year depreciation for eligible equipment (this allowance ends on December 31, 2022).
• Consider whether deferring or accelerating income would be advantageous.
• Take out loans you need now before interest rates start rising.
• Set up a retirement account for you and your employees.
Because of the uncertainties and complications of the current situation, we advocate meeting with your tax professional to determine the right strategies for you. If you are a client of ours, we offer you unlimited complimentary tax planning advice.
Professional Tax Services is a locally owned provider serving over 3,500 local residents and businesses. For more information, call 661-259-1967 or visit www.protaxservices.com. Through their complimentary EZ2 Thrive program, they provide unlimited free tax planning advice to their clients.