On the last Thrive For[e]ward podcast we jumped right into taxes. I know it seems early to be talking and planning for this year, let alone next year but you don’t want to wait.
Today, on part two we are going to bring you up to speed and talk about what new changes we are seeing for 2022. I have said this before and I’ll say it again… if this isn’t “your jam” lean into a tax professional to help you. Personally, as a business owner it was one of the best decisions I’ve made and I consider myself pretty educated on this subject. Partnering with an expert to come onboard was a huge benefit.
When I work with my clients and we sit down at the beginning of each year, I ask them to consider what transitions or changes in life they anticipate experiencing in the coming year. This might be a new job, having a baby, buying a car, or selling and buying a new home. We also address what they expect or predict their income to be and how they plan to save for retirement.
All these discussions lead into the tax conversations and organizational process. However, saving on taxes isn’t the only thing you should be thinking about. We should have different buckets of money that we are planning for in the long term. Buckets that might include tax deferred, a tax free bucket and then a taxable bucket. As you make tax deductible contributions for the sole reason to save on what you might owe currently, this can be tricky. Get the information and really understand the amount you are saving today and how that will impact the long term. For an example, if you are putting money in a tax deferred bucket but the tax rates go up, you may have to pay more on the money you save in the future. Your short term strategies will impact the long term and make sure you have your team working together for what truly works best for you.
This strategy can also be thought of for charitable contributions as well. I have had clients who have been told by their tax professional to donate XYZ because it will lower their taxes. A follow up question should be, “How much will it lower?” Does it make sense with your overall wealth vision to take money from you’re your savings, investments, retirement, etc to save a marginal amount on taxes. In addition, sometimes these larger gifts make more sense to take long term strategy on, involving your financial planner, attorney, and tax preparer depending on your overall wealth picture and the vision you have for it.
And charitable donations isn’t just the only thing that is a write off.
According to Kiplinger the Most-Overlooked Tax Deductions and Credits for the Self-Employed are:
Business Use of a Vehicle
Health Insurance Premiums
Social Security Taxes You Pay
Retirement Tax Shelters and Credits
Covid-Related Sick and Family Leave Credits
Deduction for Qualified Business Income
And if you are a business owner, the planning process for taxes can be a challenge. We might not know our revenue, expenses and what our taxable income in. But you need to make sure you are putting money aside and looking at the big picture for you! Also, please don’t subscribe to the $0 tax strategies out there. If you don’t pay taxes, you may not be able to prove income to purchase a home, second property, car, and other things that may require lending.
I find one of many tools out there that is helpful is Quickbooks. I use it to track and manage my expenses. Technology is great that we can even scan our receipts on our phone and upload!
So, what can we see as changes for the 2022 tax year? Currently there a few to mention but the IRS.gov has a lot of resources and will provide answers to several tax questions specific to your situation.
According to Forbes, there are three immediate changes are seeing for the 2022 tax season.
Your Monthly Child Tax Credit Payments May Increase or Decrease Your Refund
2021 Recovery Rebate Tax Credit for Third Stimulus Payments
You Don’t Have to Itemize to Claim Charitable Donations
As always, YOU ARE WORTHY OF WEALTH and if you are interested in learning more about Forethought Planning and how we can help you on your journey, please schedule an appointment to our complimentary 30 min Wealth Assessment session to learn more about how we incorporate these strategies and others to assist you through the financial planning process.
The information presented here is for general information only and not intended as tax or legal advice. Please see a tax professional for your specific situation. Forethought Planning and LPL Financial do not offer tax or legal advice.
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