Lanette R.

Jones

Over 30 years of
Tax experience

Degreed
Accountant
From Florida A&M
University
 Contribute to tax-
advantaged accounts
 While you have until the tax filing
deadline of April 18, 2023, to contribute
to an IRA for the current year, you must
make your final contributions to a 401(k)
or 403(b) by December 31, 2022. You can
contribute up to $20,500 before taxes.
 If you're 50 or over, you can make
additional catch-up contributions of
$6,500. That money reduces your taxable
income dollar for dollar.
 Don't forget about health savings
accounts (HSAs) if you have a high-
deductible health plan. While you also
have until the April tax filing deadline to
contribute, you can put away up to $3,650
for an individual and $7,300 for a family.
The money can help to lower your taxable
income, and distributions are tax-free if
they are used for qualified medical
expenses.
 Turn investment losses
into tax gains
 Lost money on your investments this
year? With stocks, bonds, and crypto all
down, you're not alone. But you can take
some of the stings out of those losses by
tax-loss harvesting. This strategy
generally allows you to sell investments
that are down, replace them with
reasonably similar investments, and then
use those losses to offset realized
investment gains plus up to $3,000 of
regular income each year.
 The end result is that less of your money
goes to taxes and more may stay invested
and working for you. Also, unused losses
carry over to subsequent years. But this
strategy can be complicated. Wash sale
rules may apply, meaning you can't sell
most investments for a loss and reinvest
in the same, or a substantially identical
one, within 31 days or you'll lose the tax
break.
 Turn investment losses
into tax gains
 An exception: Wash sale rules
currently do not apply to
cryptocurrencies, as they are not
regulated as securities. That
means you can sell coins whose
value has declined and buy them
back immediately at the same
price, potentially realizing the
loss while still holding the asset.
Pending legislation about
cryptocurrency regulations may
eliminate this loophole,
however, so be sure to work
with a tax professional to stay on
top of changes.
 Consider a Roth
conversion
 A Roth conversion involves
transferring money from a traditional
IRA to a Roth IRA. You'll pay taxes
on the converted amount, but then
the money has growth potential and
can be withdrawn tax-free—and it
isn't subject to a required minimum
distribution for the life of the owner.
 Why consider a Roth IRA
conversion now? First, with many
investments down this year, you can
convert more shares for the same
total amount and the same potential
tax bill.
 Also, tax rates are set to increase in
2026, so you could end up paying
higher rates later on conversions.
 Consider itemizing
 There are 5 main categories of
itemizable deductions, subject to
various limitations, and if these
categories add up to more than the
standard deduction, you may want to
itemize.
 For 2022, married couples have a
standard deduction of $25,900, and
single filers have a standard
deduction of $12,950.
 Generally, speaking, you can deduct
medical expenses, home mortgage
interest, state and local taxes,
charitable contributions, and theft
and casualty losses due to a federally
declared disaster.
 Consider itemizing

 Many deductions have limits,

however. For example, you could
deduct health care costs that are
more than 7.5% of your adjusted
gross income (AGI).
 Deductible expenses may include
fees for doctor and hospital visits,
dentists, chiropractors, mental health
care, medical plan premiums, and
much more.
 If you are close to 7.5% of AGI,
consider getting treatments and
paying other medical bills before
year-end, particularly if you were
planning to do so early in the new
year.
Defer some income

 If you have freelance or

other gig income, you
might consider delaying
billing for your services
until early next year,
thereby limiting your
taxable income this year.
Be sure to work with your
accountant to create the
best plan.
College costs with
education breaks
 The American Opportunity Tax
Credit provides a dollar-for-dollar
credit on a portion of qualified
education expenses paid for by an
eligible student for the first 4
years of higher education.
 The full $2,500-per-student credit
requires $4,000 in qualified
spending and is available to
people whose modified AGI is
less than $80,000 for single filers
and less than $160,000 for joint
filers.
 To make the most of this break,
you might want to consider
prepaying the first semester of
2023 this year. Additionally, you
may be able to get a tax deduction
for contributions to a 529 college
saving account, made by
December 31.
 College costs with
education breaks
 Such plans are typically state-
sponsored and may also allow
for state income tax
deductions. While there's no
contribution limit, the federal
gift tax may apply for amounts
exceeding $16,000.
 You can also accelerate 5 years
of giving without incurring gift
taxes but would be unable to
give in the subsequent 4 years
without triggering the gift tax.
 Bunch of charitable
contributions

 Bunching means concentrating

charitable deductions in a single
year, and skipping the following
year, or even several years.
 The following year, you likely
wouldn't claim charitable
deductions, but you'd still qualify
for the standard deduction.
 And if you put your contributions
into a donor-advised fund, you
can take the charitable deduction
in 2022 but spread your giving
out over many years.
Donate appreciated
assets

 Itemizers can also donate

appreciated assets held longer than
one year to a qualified public
charity and deduct the fair market
value of the asset without paying
capital gains tax. The donation is
subject to a 30% adjusted gross
income (AGI) limitation.
 Don't forget
contributions of cash
and property

 Itemizers can deduct cash

contributions as well as property—
think the table you donate to your
local school—is up to 60% of your
AGI.
 In addition to determining the fair
market value of donated items, the
IRS requires documentation, such as
a qualified appraisal, for many
deductions over $5,000.
 Exceptions may include personal
property owned less than one year,
and publicly traded stock and mutual
funds.
 Consider gifting to
loved ones

 You can gift up to $16,000 per

recipient to as many people as you
like. So if you have 4 children,
you can give $16,000 to each one.
 If you're married, each person in
the couple can gift this amount.
 While you don't get an income tax
deduction for such gifts, the
recipient won't owe taxes, and the
gift can help reduce the value of
your estate, without using up your
lifetime gift and estate tax
exemption.
 Don't forget RMDs
 If you're 72 or older, you have until
December 31 to take your required
minimum distribution, or RMD,
from traditional IRAs, 401(k)s, and
other qualified retirement plans.
 This is an important deadline:
Missing it can result in a hefty
penalty of 50% of the required
RMD. Your first RMD is due by
April 1 of the year following the
year you turn 72.
 If this is your first year, think
carefully about waiting until the
April 1 deadline of the following
year.
 You may be taking 2 RMDs in a
single tax year, which can increase
your taxable income. Remember,
withdrawals are taxable, but there
are ways to help reduce taxes with
careful planning.
 No need for your RMD?

 Consider giving it to charity. You can

make a qualified charitable
contribution (QCD) from an IRA of
up to $100,000 per individual (twice
that amount if you're married and
filing jointly), as long as the charity
receives your donation by December
31.
 The money you donate is not
deductible, but it's not subject to
federal taxes, qualifies as your RMD
for the year, and you can make one
even if you don't itemize.
 QCDs are also allowable starting at
age 70½, so you don't have to wait
until you're 72 to take advantage of
one.
 Side Hustle Expenses

 Here’s one you may not have

thought of: if you’ve found a
way to monetize your hobby,
you can deduct expenses related
to it from your taxable income.
 Let’s say you like to knit and
have started selling your knitted
wares online. You can possibly
deduct expenses related to that–
like knitting needles, patterns,
and yarn–from your income.
 Bonus depreciation
 Bonus depreciation is another way to
write off expensive equipment you’ve
purchased for your store. Unlike
section 179, the purchase price is
deducted from business profits over the
time it’s used.
 For example a high-grade security
system cost the business $50,000.
Instead of writing that off in your first
financial year using section 179, bonus
depreciation might see you writing off
$5,000 for each year it’s in use.
 The main advantage of bonus
depreciation is that there’s no limit.
Riley Adams, licensed CPA and
founder of Young and the Invested,
says “The depreciation can create a net
loss, allowing you to offset future
taxable income.
 Apply for the qualified
business income
deduction

 Starting with the tax year 2018, a

new law passed that allows a new
20% tax deduction on your QBI
[qualified business income] that
reduces your taxable income.
 To qualify for QBI deduction in
2022, a single filer must have
less than $170,050 in taxable
income. This increases for joint
filers, such as partners running a
retail business, to $340,100.
 Sales Deduction
 You may already know that you can deduct
the state taxes withheld from your check or
pay in quarterly payments if you are self-
employed. Despite this, many people
overlook the fact that they can also deduct the
state taxes they had to pay the previous year
when they filed their taxes.
 If you owed state taxes when you filed last
year and paid them, you can deduct them this
year. You can also deduct any money
withheld by the state or collected that applies
toward a previous state tax debt.
 If you live in a state that does not have a state
sales tax, you may feel that you miss out on
deducting state taxes paid. In fact, the IRS
created the state sales tax deduction for states
that don't tax income. Although keeping track
of every receipt throughout the year seems
difficult, you can use the calculation provided
by the IRS to determine your deduction, so
keeping receipts isn't necessary to qualify for
this deduction..
 Child and dependent
care credit
 Many parents understand that they
are able to deduct a percentage of
childcare costs incurred so they can
work.
 What they often miss is that summer
camp costs are also deductible,
provided the camp hours match the
hours the parent is working.
 In addition to this, people miss that
dependent care costs also apply to
elder care costs or any dependent,
not just children. Because this is a
credit toward taxes owed and not just
a deduction, this is an important one
not to miss.
 Student loan interest
paid deduction
 Many students do not
understand that when their
parents or other relatives pay
their student loans, they can
actually claim the interest as a
deduction themselves.
 The reason for this is that the
IRS looks at the payment, even
if it’s made directly by the
parent, as a gift to the student.
 In other words, the parent is
giving each payment as a gift,
and the student is the one
considered to pay the interest.
  If you’re under 24 years old, ask
your parents if they’re claiming you
as independent on their tax returns
before you file yours. If you’re out
of college or have a full-time job,
chances are you’ll file on your own.
But you can avoid headaches by
checking first.

Review your withholdings

 It’s easy to brag when you get a big refund
check, but what that really means is been
lending the government money interest-free
for the year. Work with your employer to
adjust the amount withheld from each
paycheck so it more accurately reflects the
taxes you’ll need to pay at the end of the year.
 The IRS offers n online calculator to help you
fill out the W-4 form your employer uses to
figure out how much to withhold from each
paycheck.

Call home (if you are under 24) to

confirm how your parents are claiming
 Looking ahead to 2023

 Each person's tax situation is

unique, and inflation adjustments to
tax brackets announced by the IRS
for 2023 mean people may have
more taxable income before being
bumped into a higher tax bracket,
which may affect some tax
decisions.
 But it's important to consider
putting together a plan with enough
flexibility to meet your financial
goals for the current and future
years. As always, consult with your
tax advisor or a financial
professional to construct a plan that
works for you.
 Tax Paradise
500 NW 183 Street
Miami Gardens, FL 33169
(305) 685-1111

www.taxparadiseinc.net
[email protected]