As we near the fourth quarter of 2022, there are a few things you can do that will help maximize your tax savings for the year. Below I outline five key strategies I am sharing with my clients that may help you reduce your 2022 tax liability.

1. Capture tax losses to offset future capital gains.

Investors ought to be reviewing their taxable accounts and considering whether to capture tax losses to offset future capital gains. Just about every asset class is down for the year, so there are ample opportunities to capture these losses; keep in mind that they can be carried forward indefinitely.

2. Wait to purchase mutual funds.

The fourth quarter is always a tricky time to purchase mutual funds because many funds are on the verge of distributing taxable capital gains for the year. If you are considering the purchase of a mutual fund with taxable dollars, research whether the fund is paying a material gain distribution this year and, if so, wait to purchase the shares until after that date.

3. Consolidate your charitable giving.

The standard tax deduction was doubled in 2017 and there is a cap on state taxes that can be itemized, making the standard deduction more attractive. The result is that most taxpayers are no longer itemizing deductions and so get no deductions for their philanthropic gifts.

Some taxpayers are using “bunching” or consolidating their charitable giving in order to continue reaping the tax advantages of philanthropy. Consider making several years’ worth of charitable gifts at once; you can itemize your large gift in that year to maximize the tax benefit and then take the standard deduction in subsequent years. If charitable giving is an annual event for you, consider making your larger gift to a Donor Advised Fund this year and then covering your charitable commitments by transferring funds from the Donor Advised Fund to the charities you choose.

4. Maximize your retirement plan tax advantages.

Investors should check their workplace retirement accounts to make sure they are on track to meet their annual savings goals and/or contribution limits. There are still a few months’ worth of paychecks to make the necessary course corrections. The more you can save in your retirement plan (up to the contribution limit), the more you are maximizing the tax advantages.

5. Check your lifetime estate tax exemption.

Talk with your attorney and/or accountant about your lifetime estate tax exemption. The current exemption is set to drop from over $11 million to around $5 million in 2025. For families with large estates, it is important to talk this over with your financial and accounting teams.

If you would like to speak with a member of our team about strategies you can use now and in the future as part of your wealth planning process, please reach out to us.