Money Matters: Easing your tax burden for 2022 and beyond

With tax season over, there’s no time like the present to take steps to ease your tax burden for 2022 and beyond.

Planning your taxes is different from filing as Tax planning is putting yourself in a position to be happy when you retire. That means using your working years to set yourself up for sustainable tax liability in retirement.

The easiest way for people to get started with tax planning is by understanding your tax bracket. Depending on where you stand, you can either maximize the bracket you’re in or make financial moves to pull yourself back. Making moves like contributing to HSAs or 529 plans can decrease your taxable income and potentially change your tax bracket.

Another thing to try is to diversify your assets. A lot of people continue to invest in pre-tax accounts, like traditional IRAs and 401(k)s. Money in these types of accounts will be taxed as you withdraw it, meaning your retirement savings won’t go as far as you think.

Barry Bigelow from Great waters financial says, “A big mistake I see is not having tax diversification, which isn’t talked about as much as other types of diversification, but it’s just as important.”

And while we can’t predict future tax rates; we can plan for the unpredictability.

Bigelow says, “It’s always dangerous to speculate on the future of taxes. We have seen a push for high-income earners to see greater levels of taxation, but there has been no major movement in that direction.”

Adding on saying, “It’s important to remember that there are a lot of factors impacting our larger financial picture other than lawmakers on Capitol Hill, like the conflict between Russia and Ukraine, supply chain issues, interest rates and market volatility. With so many things constantly up in the air, proactive tax planning is the best defense against the unknown.”