There are less than six weeks left in 2022. You have roughly 40 days to assemble a Thanksgiving feast, shop for gifts, prepare for holiday get-togethers, and complete year-end, tax-related actions. The clock is ticking!
Year-End Tax Deadlines
There are a number of year-end tax-related tasks for individuals. Completing these tasks sooner rather than later helps ensure your contribution, gift or distribution aren’t made in a year-end mad scramble!
- 529 contributions (and reimbursements) – To be eligible for state tax credits or deductions in tax year 2022, 529 contributions must be made by December 31; relatedly, reimbursements from 529s for qualified education expenses incurred in 2022 must be made by December 31 as well.
- Charitable gifting – Financial gifts to charity must be complete by December 31 to be deductible on 2022 tax returns; checks must be postmarked by December 31 and gifts of stocks, bonds or mutual funds must be received by December 31.
- Required minimum distributions – For those age 72 and above, required minimum distributions (RMDs) from retirement accounts must be taken by December 31; however, those who turned 72 in 2022 have until April 3, 2023 to take their first RMD.
- Qualified charitable distributions – For those age 70.5 and older, qualified charitable distributions (QCDs) from retirement accounts must be distributed by December 31.
- Roth conversions – If converting traditional IRA or 401(k)/403(b) pre-tax funds to a Roth IRA the conversion must be complete by December 31.
- Employer-sponsored retirement plan contributions – Employee contributions to 401(k)s, 403(b)s, and deferred compensation plans for tax year 2022 must be complete by December 31.
- Solo 401k establishment – For a self-employed individual to make a solo 401(k) contribution for 2022, the solo 401(k) needs to be established on or before December 31.
Tax “To Dos” that Can Wait
Are there important 2022 tax deadlines that fall after December 31? Luckily there are a handful of actions that fall after the ever-busy holiday season.
- Q4 estimated tax payments – The final estimated tax payment for 2022 has a due date of January 16, 2023.
- Retirement account and HSA contributions – Contributions to IRAs, Roth IRAs, health savings accounts (HSA), and most self-employed retirement plans for tax year 2022 do not have to be made until the tax filing deadline in April 2023; if a tax filing extension is filed even more time is gained to contribute (up to October 2023).
- Retirement account re-characterizations – If you made a contribution to a Roth IRA, but aren’t eligible to contribute due to your income, the contribution can be recharacterized as an IRA contribution; the recharacterization must be completed by your tax filing deadline.
- Retirement account excess contributions – Contributions to IRAs, Roth IRAs, and HSAs cannot exceed the IRS contribution limits. Excess contributions need to be removed by the tax filing deadline for the year the contribution was made.
A Word on 2023 Contribution Increases
If you contribute automatically to any of these accounts with the goal of maximizing your contribution, you’ll want to account for the following contributions increases in 2023:
- HSA – $3,850 for self-only coverage and $7,750 for family coverage; individuals age 55 and up can contribute an additional $1,000.
- 401(k) / 403(b) – $22,500; individuals age 50 and up can contribute an additional $7,500.
- IRA/Roth IRA – $6,500; individuals age 50 and up can contribute an additional $1,000.
- Simple IRA – $15,500; individuals age 50 and up can contribute an additional $3,500.
- Indiana 529 state tax credit – contributions by Indiana taxpayers qualify for a 20% tax credit with a new maximum credit of $1,500 for a $7,500 contribution.
Completing time-sensitive tax-related actions sooner rather than later means your focus can be on what truly matters during the holiday season – spending time with family and friends. Of course, certain deadlines fall after the holidays, but be sure to adjust automatic contributions to accounts you’re looking to maximize in 2023!
Abby VanDerHeyden, CFP, is a Wealth Advisor with Bedel Financial Consulting, Inc., a wealth management firm located in Indianapolis. For more information, visit their website at www.bedelfinancial.com or email Abby at AVanDerHeyden@bedelfinancial.com.