CINCINNATI — With tax season fast approaching, experts say now is a good time to prepare for it.
Figuring out your tax bracket is the first step, according to Personal Financial Specialist Bill Hesch.
“If you’re trying to do tax planning and you’re trying to maximize your tax deductions — and that’s really important in the tax planning that we do,” Hesch said.
He also suggests considering the benefits of tax-saving tools, such as a Health Savings Account (HSA). Your contributions to your HSA are tax-free, reduce your taxable income, and withdrawals are tax-free for qualifying medical expenses, including co-payments, medical procedures, and prescriptions.
“You can withdraw the money and you don’t have to pay medical bills,” he said. “You just have documents that show you’ve paid that amount of medical expenses over the years and it’s tax-exempt.”
Along with your HSA, he says, your Individual Retirement Account, or IRA, will also help reduce your tax burden because it can lower your taxable income.
“It accumulates tax-free when you withdraw it and you pay no tax on it,” he said. “So the Roth IRA is really a good tax shelter in that context, almost like the HSA.”
If you’re looking for even more tax deductions for 2022, he says a donor-advised fund lets you put money in an account for future giving.
“You can put money into this fund and get a tax deduction for it, and then use that money over the next few years to donate,” he said.
While these tips can be helpful, Hesch said it’s always best to consult with a certified public accountant (CPA) or tax advisor to make sure you find the best deductions.
“You work with a team of advisors; you work with your lawyer; you work with your financial investment adviser; you work with your CPA to do your financial planning, your retirement planning, and your tax planning,” he said.