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Year-end tax planning: 5 actions to prepare for the 2022 tax season

Now is the time for you to take steps that might minimize your tax bill.


Although we entered 2022 with a lot of uncertainty about potential tax law changes, very few of the proposals that would have impacted wealthy taxpayers were enacted.  

In August, President Biden signed into law the Inflation Reduction Act. The Inflation Reduction Act focused on ramping up climate- and healthcare-related spending, and left out virtually all measures that would have directly raised tax rates on individual taxpayers. 1

Now that there’s certainty about the tax landscape (until at least the end of the year and likely for a couple of years to come), taxpayers can plan with a high degree of confidence and try to minimize their 2022 tax liabilities.  

We recommend you act now to determine what actions you might take before 2022 ends so that you will be best positioned financially when you file your return next year.

 

1. Start here: What’s your “base case”? You can find out now.


Your first step is to get a “pro forma” tax return from your tax advisor so that you can understand your current tax situation. From there, you can see what would happen if you were to realize more income or incur any additional deductions this year.  

Consider asking your J.P. Morgan team for a “tax summary” to help with your tax estimates. With your tax snapshot in hand, you can better assess if it makes sense to implement tax planning strategies before year-end. 

 

2. Can you reduce your 2022 tax liability?



3. Are you making the most of your compensation and benefits?





4. Are you giving tax-wisely to your children?



5. Are you getting the help you need?

These are just a few examples of the many opportunities you may have right now to strengthen your financial health before year-end.

Speak with your tax advisor about which actions may be right for you. You also can ask your J.P. Morgan team to work with your tax advisor to help you evaluate how any actions you might take would align with your long-term financial goals.

The sooner you have these discussions, the more benefit you may be able to reap from your year-end planning.

 

JPMorgan Chase & Co., its affiliates, and employees do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for tax, legal and accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any financial transaction.​

 

1. The Act does include provisions to: (1) levy a 1% excise tax on publicly traded stock buybacks (effective after 12/31/22); (2) extend a provision that limits the use of “excess” business loss deductions through 2028; (3) enact a 15% alternative minimum tax on large corporations (effective after 12/31/22); and (4) increase the Internal Revenue Service’s budget by almost $80 billion over the next 10 years. If you want to learn more about the Inflation Reduction Act and our tax outlook, ask your J.P. Morgan team for our “Outlook for Tax Law Changes: Inflation Reduction Act Highlights.”
2. Please consult your tax advisor to see if tax-loss harvesting is available with your accounts and how potential buybacks may be done successfully. Taxes should not be the only factor to drive an investment decision. 
3. Internal Revenue Code Sec. 1091. Before acting, please be sure to discuss your potential buybacks with your tax advisor. Proposals were made in Congress last year to expand the scope of assets subject to the wash sale rule beyond “securities.” These proposals did not pass, so at this time, the wash sale rule still does not apply to assets—including foreign exchange, commodities such as gold, and digital assets such as cryptocurrency—that historically fall outside the scope of the rule.
4. Up to $100,000 per taxpayer. The amount going to the charity is not considered income to you; on other hand, you would not be able to deduct that amount as a charitable donation.
5. The proposed Treasury regulation would apply to “non-eligible designated beneficiaries” (non-EDBs) of a decedent who was required to take RMDs. Non-EDBs include designated beneficiaries other than: 1) decedent’s spouse; 2) decedent’s minor children; 3) someone who is chronically ill or disabled; or 4) a person who is no more than 10 years younger than the decedent.

 

 

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