Tax planning is a critical challenge for higher-income taxpayers
This year’s tax provides a great deal of useful information to help with your tax and financial planning – particularly if you are a higher-income taxpayer or business owner.
As usual, the tax guide was prepared by a trusted third-party provider and is intended to offer food for thought. If something piques your interest or raises a question, your AKM CPA can help you evaluate your own circumstances and consider your best strategic options.
Contents of the 2022-2023 Tax Guide
Income and deduction planning to minimize 2022 taxes [Page 2] – An overview of tax on ordinary income and the critical importance of timing both income and deductions. Although the threat of falling under the AMT is smaller than in prior years, a number of popular deductions may still be negatively impacted by the Tax Cuts and Jobs Act of 2017. This section also includes particular tips for business owners and self-employed individuals. Helpful summaries:
- Chart: 2022 standard deductions
- Case Study: Bunching Medical Expenses to Save Taxes
- Chart: Itemized Deductions that Are Also Deductible for AMT Purposes
- Case Study: Avoiding Underpayment Penalties
Smart tax planning for your exec comp package is critical [Page 6] – Strategies for crafting a tax-efficient total compensation package, including restricted stocks, RSUs, incentive stock options, nonqualified options and NQDCs. Helpful summary:
- Case study: Watch out for falling stock prices after exercising ISOs
The ins and outs of tax planning for investments [Page 8] – A detailed summary of tax considerations when buying and selling investments, including an overview of capital gains tax and timing and a discussion of strategic use of losses. Helpful summaries:
- Chart: What’s the maximum 2022 capital gains tax rate?
- Case study: Use capital losses to absorb unrecognized gains
- Case study: How to qualify for the 0% capital gains tax rate
- Case study: Tax-exempt or taxable bonds? It’s a question of yield
Making the most of tax breaks for your home and investment real estate [Page 12] – Overview of strategies for maximizing tax benefits of owning a principal residence, vacation home or rental property, including depreciation-related breaks and the interest expense deduction for real estate businesses. Helpful summary:
- Case study: 2 tax-deferred strategies for appreciated real estate
Saving taxes today while planning for tomorrow [Page 14] – A discussion of the challenges business owners face in balancing the business’ income, expenses and tax breaks with plans for their individual financial futures. The section includes an overview of how business structure can impact tax liabilities, the TCJA provisions favorable to owners of pass-through entities and a short discussion on exit planning. Helpful summaries:
- Chart: Comparison of contribution limits of profit-sharing plan vs SEP
- Case study: Tax planning for a sale or acquisition
Take advantage of one of the most flexible tax planning tools [Page 16] – A discussion of how to leverage the flexibility of charitable contributions in your tax planning, including summaries of substantiation requirements and donating appreciated assets. There are also short explorations of making gifts over time and using charitable remainder trusts and charitable lead trusts. Helpful summaries:
- Chart: How much can itemizers deduct for their donations?
- What’s New: Expanded charitable deduction breaks have expired
Investing in a child’s financial future [Page 18] – An overview of how families can put the younger generations on a sound financial footing. Includes an exploration of the expanded child tax credit, tax liabilities on income earned by dependent children and the strategic use of IRAs to help put teens on the right financial track. There’s also a longer discussion of various approaches to paying for higher education. Helpful summary:
- Case study: Roth IRAs are tax-smart for teens
Leveraging the power of tax-advantaged plans [Page 20] – An overview of retirement plan contribution strategies, the benefits of converting to a Roth IRA and the penalties associated with early withdrawals. Helpful summaries:
- Chart: Retirement plan contribution limits for 2022
- Case study: To convert or not to convert to a Roth IRA
Locking in tax savings while you can [Page 22] – Discussion of record-high exemptions created by the “Tax Cuts and Jobs Act of 2017,” and when those exemptions are expected to revert to lower amounts. Also includes summaries of state tax issues, how to time gifts, the portability of various exemptions and some creative uses of trusts. Helpful summaries:
- Chart: 2022 transfer tax exemptions and rates
- Case study: Taking advantage of valuation discounts
Tax rates [Page 24] – 2022 individual, corporate and trusts and estates income tax rate schedules.