| With the holiday season right around the corner, many of us are thinking of trimming the Christmas tree, not our tax bill.
But if taxes are on your mind, I have good news for you because there's still time to trim your tax bill and possibly boost your refund before the end of the year.
While it may not feel like a top priority right now, trimming your 2022 tax bill may actually boost your finances going into 2023.
CNBC personal finance reporter Kate Dore reports that, depending on your 2022 income, you may consider some lesser-known ways to trim your 2022 tax bill. Those strategies include deferring a holiday bonus, "bunching" medical expenses and using a partial Roth individual retirement account conversion.
If you've had a strong year and expect lower earnings in 2023, it may make sense to try to defer a holiday bonus until the new year, Dore reports. Also, experts suggest looking to prepay future medical expenses for a deduction.
While it's difficult to plan for medical expenses, you're more likely to maximize medical expense deductions by "bunching" expenses for two years into one, experts say.
Finally, experts say investors can minimize their taxes by using a partial Roth IRA conversion. You are basically transferring some of your traditional IRA savings into a Roth IRA with a Roth conversion. With the partial Roth conversion, you can move money out of your traditional IRA over several years.
Of course, you pay the taxes on it upfront and have a new source of tax-free retirement income. However, when you get the timing and size of those conversions right, you can stay within your current tax bracket while reducing the size of your traditional IRA and future required minimum distribution.
For more advice to help you make smart financial decisions, check out CNBC's Financial Advisor Hub and Personal Finance section. |
EmoticonEmoticon