It’s that time of year again! The time of year when it is time to start thinking about how you can save a ton of money on your 2022 tax bill before it is too late!
In today’s episode, I review 8 ways to save money on taxes by doing things that you are probably already doing!
Let’s get to it!
8 Ways to Save Money on Taxes in 2022
Here are 8 strategies you should be thinking about to save taxes in 2022 as part of your year end checklist. We go into each of these in a bit more detail on the podcast.
- If you have an LLC… run a profit and loss report and determine whether it makes sense to elect S-Corp Status.
- If you are already an S-Corp, start planning to run your year end payroll. Typically this is just done to pay all the required payroll taxes for the year, so you will need cash on hand (profit first anyone?)
- If you have a Solo 401k, make plans to maximize your contributions. If you don't have a Solo 401(k) set up, consider establishing one. Keep in mind that this must be done by December 31st. Here are the contribution limits for 2022:
- $20,500 as an individual
- Your “employer” may contribute an additional 25% of your compensation, up to a maximum of $61,000 in 2022.
- If you are 50 or older, you may contribute an additional $6,500
- Sell your losers – but don’t invest into a similar security for 30 days to avoid wash sale rules
- Wait to rebalance (avoid cap gains and dividend distributions that occur at the end of the year) until January.
- Delay income if possible. December is a great month to run free promotions and free trials that will start to pay off in January.
- Accelerate expenses – if you have extra cash, consider pre-paying your expenses such as rent, utilities, purchasing a new computer, etc.
- Maximize work-related expense deductions such as:
- transportation and travel expenses (mileage)
- meals and entertainment
- professional dues
- Legal fees
- work-related education – conferences, continuing educations, etc.
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The Biggest Takeaways
- As a self-employed person, you have a bunch of huge tax deductions available to you, including the Solo 401(k) and SEP IRA.
- Having solid contracts in place to protect your legal relationships is extremely important. For some lawyer-drafted templates that you can use immediately, click here.
- Setting up an S-Corp will save you thousands of dollars in self-employment taxes if you are profitable and making more than $25-50k in net profit in your business.
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