This checklist should provide some actions that apply to your unique situation.  It will, hopefully, help you minimize your taxes or avoid penalties.  It may also help your estate planning and charitable giving.  In difficult years like 2022, there can be opportunities.

Required Minimum Distributions (RMDs) from retirement accounts such as an IRA, SEP or 401(k) plan are required each year when the account owner has reached age 72.  (The required age used to be 70.5 but changed in 2020).  If 2022 is your first year to take an RMD, then you have until April 1, 2023 to do so.  However, if you have already started taking RMDs in the past, then the deadline for you is December 31, 2022.  The best way to avoid any penalty for failing to make an RMD is to consult with your tax advisor.

Along those same lines, if you wish to convert any funds from a traditional IRA to a Roth, this transaction must be completed by December 31 or next year’s tax rates will apply.  Again, it’s best to consult your tax advisor as soon as possible to better understand if a Roth conversion is appropriate for you.

Tax loss harvesting can help reduce your tax liability.  Review your taxable investment accounts for realized gains as well as positions that have a loss.  There’s a tax rate difference between a short-term gain/loss vs a long-term gain/loss, but effectively using losses to offset gains can at least help mitigate your tax bill.  Again, your tax advisor plays a critical role to helping you understand these transactions and their taxable impact.

For business owners, December is a good time to either accelerate business expenditures or defer spending until the following year.  Business expenses can be deductible, so analyze if it’s best to take these in 2022 or wait until 2023 rolls around to get the maximum deduction for your business.

Some employers offer health saving accounts that do not allow funds in these accounts to rollover to next year (aka, a “use it or lose it” requirement).  Make sure you are not leaving any unnecessary funds in this type of account.  Also remember that health insurance deductibles reset at the beginning of the year so if you have any immediate medical needs, you might wish to incur these in this year.

If you own real estate, you might consider paying the property taxes before December 31, as they may be deductible and more helpful to your tax situation this year.  Property tax deductions are capped so please review carefully with your tax advisor.

Charitable contributions must be made by December 31 to count for the 2022 tax year.  Charitable contribution limits have changed in the past few years, so make sure you know the tax consequences of your gifts.  Also, if you send your IRA RMD directly to a charitable organization (also called a “QCD” or Qualified Charitable Distribution), you could receive preferential tax treatment. 

Finally, this is a good time of year to review your estate plan or if you don’t have one, consult with an attorney to make sure you have a power of attorney, health directive and your final wishes are appropriately expressed.  An estate plan is not “required,” but I do believe it can bring a sense of peace when completed.

No matter where you are in life, my guess is that two or three items on this list will apply to you and your family.  I encourage you to act on these items as a way to end the year strong.  If you have any questions, please let me know.  Have a wonderful holiday season!