By Jenni Riley, MBA, FPQP™
When the end of year looms into sight, we begin focusing on taxes and how to lower what gets pulled back out of our wallets. One of the most effective ways without even navigating the complicated tax provisions is to lower your reportable income. We don’t actually want to earn less, so the easiest solution is to stash as much as you can into tax-advantaged accounts. You can maximize your contributions this year and you will be able to “squirrel away” even more in 2022 as some limits go up.
Contribution limits for 401(k) and other retirement plans for the 2022 tax year are $20,500 or $27,000 if you’re 50 or older (2021: $19,500 and $26,000).
You can accumulate funds on a tax-deferred basis to pay for healthcare expenses through a health savings account (HSA) or flexible savings account (FSA). HSA contribution maximums in 2022 are $3,650 for self-only and $7,300 for families, with an additional $1,000 catch-up contribution allowed for individuals age 55 or older (2021: $3,600 and $7,200). The limit for individual health FSA contributions remain $2,750 (note that dependent care FSAs have a higher cap of $10,500); employer contributions do not count toward this maximum.
Once you maximize employer retirement plans, consider contributing to an IRA (still a $6,000/year limit, or $7,000 if you’re 50 or over). Traditional IRA contributions are tax deductible if your modified adjusted gross income is under $78,000 for individuals (phase-outs begin at $68,000) or $129,000 for joint filers (phase-outs begin at $109,000). You must establish a new IRA account by April 15, 2023, for 2022 contributions, and you have until then to make 2022 contributions to an IRA.
If you work for yourself, consider contributing to a solo 401(k) retirement plan, SEP IRA or SIMPLE plan.
Talk to a financial advisor to help create a contribution strategy that works for you.
HAZLETT WEALTH MANAGEMENT, LLC is independent of Raymond James and is not a registered broker/dealer. Investment advisory services are offered through Raymond James Financial Services Advisors, Inc. Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC. Investing involves risk, and you may incur a profit or loss regardless of the strategy selected. Raymond James financial advisors do not render advice on tax or legal matters. You should discuss any tax or legal matters with the appropriate professional. Contributions to a traditional IRA may be tax-deductible depending on the taxpayer’s income, tax-filing status and other factors. 675 Sun Valley Road, Suite J1 + J2 Ketchum, Idaho 83340 208.726.0605. HazlettWealthManagement.com