There's less than one month until the 2022 income tax filing deadline, and the IRS has warned that average refunds will be smaller compared to the last few years. But there are still a few last-minute ways to reduce your bill—or get a bigger refund.
Most Americans have until April 18 to file their 2022 income tax form (exceptions are noted here). And while many tax moves need to be made before the end of the contribution year (so in this case, Dec. 31, 2022), there are a couple of strategies that have a slightly longer timeline.
One of the easiest ways to reduce your tax bill before then is to contribute to a pre-tax individual retirement account (IRA). If you meet the income, filing status, and workplace retirement plan participation requirements, you may be able to claim a deduction on your income taxes.
This doesn't include contributions to Roth IRAs—while you can still contribute to one for 2022, it won't lower your taxable income for the year. That said, contributing to a Roth IRA will help you build your retirement savings overall. If you're in a lower tax bracket now, the tax savings from a Roth IRA probably outweigh those from contributing to a traditional IRA.
You can contribute up to $6,000 to an IRA for 2022, or $7,000 if you're 50 or older; you have until April 18 to do so (just make sure you designate the contribution is for 2022). Remember: The $6,000 or $7,000 limit is for both traditional and Roth accounts combined.
How much can that reduce your bill? If you make the maximum contribution of $6,000 in your traditional IRA and your top tax rate is 24%, you can save $1,440 in federal income tax this year, according to U.S. News (that said, you will pay taxes when you make a withdrawal from the account in retirement).
Other ways to save on your tax bill
Some people may also qualify for a spousal IRA deduction. Spousal IRAs allow the working partner to set aside money in a retirement account if their partner does not work. These are separate accounts, so the working spouse can contribute $12,000 total (or $14,000 if they are 50 or older).
Likewise, April 18 is the deadline for most people to contribute to a simplified employee pension plan (a SEP IRA) and savings incentive match plan for employees (SIMPLE IRA). These accounts are for business owners—including those who are self-employed—and their employees, and have much higher contribution limits than the traditional IRA.
That said, the deadline to contribute to a SEP IRA is technically based on when the business tax returns are due. So if the business filed an extension, contributions for 2022 could be made as late as October 16, 2023.
SEP contributions can’t exceed 25% of the employee’s pay or $61,000, whichever is less. For SIMPLE Plans, the 2022 contribution limits are $14,000.
Finally, make sure you're maximizing any other deductions and credits you might qualify for. There are tax credits for those with children or dependents, for purchasing an electric vehicle, and for adding solar panels to your home.
There are also tax deductions available for student loan borrowers who paid interest on their loans, for those who made a charitable donation, and for those who contributed to a health savings account.
