3 last-minute moves to lower your 2022 tax bill or boost your refund

The tax deadline is approaching, and there are still a few ways to reduce your 2022 bill or boost your refund, experts say.

Once the calendar year ends, “the toolbox of options is much smaller,” said certified financial planner John Loyd, owner at The Wealth Planner in Fort Worth, Texas. He is also an enrolled agent.

However, there are a few last-minute moves to consider before the federal tax-filing deadline, which is April 18 for most Americans.

Tommy Lucas, a CFP and enrolled agent at Moisand Fitzgerald Tamayo in Orlando, Florida, said pre-tax individual retirement account contributions are the first option to consider.

You can make pre-tax IRA deposits for 2022 through the federal tax filing deadline, which may offer a deduction to reduce your adjusted gross income. (Roth IRAs provide tax-free growth without the upfront deduction.)

The IRA contribution limit is $6,000 for 2022, with $1,000 more for investors age 50 and older, and eligibility for the deduction depends on your workplace plan participation and income. 

However, you need to consider more than the current year’s tax break before making pre-tax IRA contributions, Lucas said. 

“Typically, if you’re in the 10% or 12% [tax] bracket, you’re probably better putting money into the Roth IRA,” he said. But if you expect higher earnings in retirement, you may skip the upfront deduction for tax-free withdrawals in the future.

Married couples filing taxes jointly may also consider a lesser-known option before the tax-filing deadline: spousal IRA deposits.

IRA contributions require “earned income,” such as wages from a job or self-employment earnings. But Loyd said spousal IRAs allow both partners to contribute to separate accounts based on one spouse’s earnings. “It’s definitely a surprise for clients,” he said.

For example, if one spouse doesn’t work outside the home or retires early, they can still contribute to their own IRA, as long as their partner has earned income.

For 2022, you can make total contributions of up to $12,000 or $14,000, as long as one spouse had at least that much taxable income. Collectively, annual spousal IRA deposits can’t exceed joint taxable income or two times the yearly IRA limit.

Another way to score a deduction before the tax filing deadline is by contributing to your health savings account, or HSA — provided you had eligible high-deductible health insurance in 2022.

These accounts offer three tax benefits: an upfront deduction for contributions, tax-free earnings and tax-free withdrawals for qualified medical expenses.

“That’s an easy one, especially if you weren’t making contributions through your employer,” Lucas said.

For 2022, the HSA contribution limit for individuals is $3,650 and families can deposit up to $7,300, which qualifies for a deduction to reduce adjusted gross income.