Please see below for some key tax considerations for your 2022 tax filing and 2023 tax year:
Virtual currency/cryptocurrency
The sale or exchange of virtual currencies, the use of such currencies to pay for goods or services, or holding such currencies as an investment, generally has tax impacts.
Defer income
For most taxpayers, ordinary income tax rates aren’t likely to change soon, so you might want to delay asset sales or defer receipt of other income until next year.
Analyze capital gains and net investment income
While a capital gains rate increase is unlikely in the near term, it still may be worthwhile to regularly examine your asset mix as part of your planning. If you have appreciated investments and are planning to sell, determine whether you have other assets that carry losses, which you could also sell this year to offset the gains. And don’t forget about the net investment income tax, which is an additional 3.8% tax that applies to investment income earned at an adjusted gross income of $250k or more for married filers.
Bunch Deductions
Because the 2022 and 2023 standard deductions are relatively high ($25,900 & $27,700 for married filing jointly) it isn’t worthwhile for many taxpayers to itemize deductions. One strategy is to accumulate deductions that you would normally take over 2 years into a single year. For example, you could make most of your charitable contributions in a year you plan to itemize.
Optimize retirement plan contributions and other tax deferrals
Contributions can be made to certain accounts with pretax money, lowering your overall tax bill for the year. Some of the more common accounts and limits for 2022 are below:
-401k - $20,500 (additional $6,500 if you are 50 or over)
-IRA - $6,000 (additional $7,000 if you are 50 or over)
-Health Savings Account (HSA) - $3,650 for single, $7,300 for family (additional $1k for 55 or over)
Required Minimum Distribution
If you are age 72 or over then you must take required minimum distributions (RMDs) from your qualified plans and IRAs. Please contact your broker if this is the case for you and you haven’t received the RMD or any communication about it.
Gift Exemption
The gift tax exemption for 2022 is $16k and for 2023 is $17k.
EV Tax Credit
The inflation reduction act of 2022, passed in August, changed the eligibility requirement for the EV tax credit. The credit is up to $7,500 on purchase of a new or used electric Car. The new law requires some of the car parts to be manufactured in the US. The Alternate Fuels Data Center has released a list of vehicles that are eligible, the buyer will still need to check the VIN number to make sure the vehicle was assembled in the US. There is a cap of 200k vehicles sold before the credit phases out for 2022. This cap will be removed in 2023, and some of the more popular cars like the Tesla will qualify for the credit.
Business Taxpayers – Bonus Depreciation
There are very generous write-offs for business asset purchases for 2022. Businesses are able to fully depreciate business assets with lives less than 20 years in the initial year for 2022. There is no limit to how much can be depreciated in this manor for the 2022 tax year. Bonus depreciation isn’t as valuable after 2022. Unless Congress acts, the 100% write-off phases out 20% for each year after 2022. So for 2023, it’s 80%.
Businesses will still be able to use Section 179 to fully depreciate assets. Businesses can expense up to $1,080,000 of new and used business assets. This limit phases out once more than $2.7 million of assets are put into service during 2022.