After nearly three years of COVID-19 pandemic response, persistent Medicare pay cuts, and myriad other financial pressures, physicians may feel the weight of keeping their practice doors open. But they still have time to maximize their personal financial health ahead of the looming tax season.
Heather Bettridge, associate vice president of practice management services for the Texas Medical Association, directs physicians to the following tax tips provided by Dale Cooper, a certified public accountant and financial advisor at U.S. Capital Wealth Advisors in Austin.
Consider deferring income to 2023 if you expect to find yourself in a lower bracket in the new year. By doing this, you may be able to postpone paying taxes on that income until 2023.
Taxpayers may be able to lessen their 2022 tax burden by making payments they can take as itemized deductions – such as medical expenses and qualifying interest – before year’s end instead of in early 2023.
Generally, itemized charitable contributions can be deducted up to a certain portion of adjusted gross income.
Employees who anticipate owing federal income tax this tax season may consider increasing the amount of federal taxes withheld from their paycheck before the end of the year. However, time is running out to request the necessary Form W-4 change and for employers to implement it. But those who can swing it may be able to avoid a shortfall come April.
Contributing the maximum allowable amount to a traditional Individual Retirement Arrangement (IRA) or an employer-sponsored retirement plan, such as a 401(k), also can reduce 2022 taxable income. The 2022 cap for IRAs is $6,000 and increases to $7,000 for those aged 50 or older. The cap for 401(k) plans is $20,500 and increases to $27,000 for those aged 50 or older.
Take required minimum distributions
Speaking of retirement, taxpayers aged 72 or older generally must withdraw the required minimum distribution from traditional IRAs and employer-sponsored retirement plans by the end of the year – or risk losing half.
Weigh the implications of any late-in-the-year investments. For instance, taxpayers who earned income by selling securities at a profit might offset taxes on that income by selling any stock that has dropped in value before the end of the year.