There's still time to reduce your 2022 tax bill with these last-minute moves

Kate Dore -

There's still time to lower your 2022 tax bill or increase your refund, but the last chance for certain strategies is fast approaching, according to financial experts.

With less than two weeks to go until the end of the year, there are limited options to make a "real impact" on your taxes, according to certified financial planner Eric Roberge, founder of Beyond Your Hammock in Boston.

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December 31st is the deadline for many tax cut measures, leaving little time in the midst of the busy holiday season.

Here are some ideas to keep in mind before the end of the year.

“Take lemons and make lemonade” with the harvest of tax losses

With the S&P 500 Index down nearly 20% for 2022 as of noon on December 19, it may be a good time to harvest tax losses, allowing you to offset brokerage account profits with losses.

After you reduce your investment earnings in 2022, you can use the additional losses to reduce regular income by $3,000 and carry over any remaining losses to future tax years.  

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Karen Van Voorhis, CFP and director of financial planning at Daniel J. Galli & Associates in Norwell, Massachusetts, also suggested the strategy, as "we haven't seen losses like this in over a decade."

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“Picking up losses is an easy way to take lemons and make lemonade at the end of a less-than-optimal year for the stock market,” he said.

Consider a year-end Roth conversion

Another strategy to consider when the market falls is a Roth IRA conversion, which moves pre-tax funds into a Roth IRA for future tax-free growth.

However, you may have to pay tax on the converted amount.

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Roth conversions have two advantages in a down market: you can buy more shares for the same dollar amount, and you can pay less tax on the portion transferred.

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Of course, you'll want to know how the conversion affects your 2022 taxes, because more adjusted gross income can trigger higher Medicare premiums, among other tax consequences.

But with the year almost over, it's easier to estimate 2022 income and see how the conversion may affect your taxes, according to Kevin Burkle, founder of HCP Wealth Planning. 

Pool multiple years of charitable giving with a donor-advised fund

With a higher standard deduction since 2018, you're less likely to itemize deductions on your tax return, such as charitable donations or medical expenses, making these tax breaks harder to claim. 

The reason is that you choose the standard deduction or the itemized deductions on your return, whichever is greater.

For 2022, the standard deduction is $12,950 for individuals and $25,900 for married couples filing jointly. 

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One way to optimize charitable giving is to “bundle” multiple years of giving into one through a donor-advised fund, explains Philip Herzberg, CFP and principal financial advisor for Team Hewins in Miami.

The account acts like a charitable checkbook and offers an advance deduction.

The best investments to donate are "highly appreciated publicly traded stocks."

You'll avoid capital gains taxes you'd otherwise have to pay on the sale, which reduces levies while "maximizing philanthropic impact."