Tax strategy isn’t something that only happens at year-end. In fact, proper tax planning is something you prepare for all year long. As we have officially entered tax season, now is the perfect time to start preparing your finances for the year ahead. 

In the process of tax planning for the current year, you may also discover there are still opportunities you can take advantage of before you file your taxes for the previous year. One-time contributions to retirement accounts are still possible up until the April 18th tax filing deadline for instance.

If you felt like you missed an opportunity by not executing on certain financial matters before January 1, here is what you can start doing right now to set yourself up for this coming tax year.

Here are the six best tax planning steps you can take to help you stay organized, reduce your tax burden, and keep more of your money.

6 Best Tax Planning Moves


  • Max Out Your Retirement Accounts.

As an employee, make sure you are maxing out your 401(k)s and other accounts you may have. For 2021, the maximum contribution limit for your 401(k) is $19,500. In 2022, that limit increases a thousand dollars to $20,500.

As a business owner, your savings potential is exponentially higher. You can contribute up to the maximum limit as an employee and then provide yourself an employer match, saving a lot more in taxes than employed people. Total 401(k) plan contributions by both an employee and an employer are capped at $58,000 in 2021 or $61,000 in 2022.

This means that if you haven’t maxed out your retirement account for 2021, you still have time to do so. This also means that you should plan to max out at the higher amount for this current tax year. The money that goes toward a tax-deferred account like a 401(k) saves you money in taxes in the years you contribute to them. You won’t pay taxes on the money until you start taking distributions in retirement.

  • Plan Your Flow of Cash for the Year

Do you have any big purchases or payoffs in 2022? Will you have to liquidate any investments to cover these purchases or payoffs? If so, it makes sense to start planning this now so that you do not end up having to liquidate in a rush when the market is down or create unnecessary tax consequences. If you plan cash in and outflows ahead of time, you can put together a strategy to manage your investments being extra vigilant of tax-loss harvesting opportunities and seeking to reduce the tax impact of any liquidations for cash needs. 

  • Create a Donor-Advised Fund.

Feeling philanthropic? Make your gifts to the charities and institutions you support through a Donor-Advised Fund (DAF). This charitable giving financial tool allows you to make lump contributions* to the Donor Advised Fund in high tax years. By doing so, you get the tax deduction but then dole out gifts to your favorite charities throughout the years as you choose. This is a much more tax-efficient way to give gifts to the causes you care about. It is also a way to preserve more of your money so that you have even more of it to give rather than it going toward taxes. You can also significantly increase the tax benefit of your contribution by contributing appreciated assets rather than cash to the DAF. This allows you to avoid having to pay taxes on the built-in capital gain in those appreciated assets. 

(*Note that many donor-advised funds do have a minimum amount to be distributed per year, which is usually about 5% of total DAF assets but can vary from custodian to custodian. Certain limitations apply to the amount of your contribution that is tax-deductible.)

  • Do Your Roth Conversions, Backdoor or Not, Now

Roth IRAs are great savings tools that allow your money to grow tax-free. However, many people can’t open or contribute to these tax-friendly savings vehicles because they make too much money. The modified AGI to open and contribute to a Roth IRA in 2021 was less than $198,000 in 2021 or $204,000 for 2022 for married filing jointly.

But it’s not all bad news. For now, people can do what is known as a Backdoor Roth Conversion. A Backdoor Roth is a strategy that allows people making over the income limit to convert a traditional IRA into a Roth, thereby paying the taxes on their savings now and allowing the funds to continue to grow tax-free until retirement. 

If Biden’s “Build Back Better” Act passes, Backdoor Roth’s will be eliminated and not possible for 2022. So, something to watch. 

If you expect to have less income now or the same or higher income in retirement, you may want to consider converting some of your tax-deferred retirement funds into a Roth IRA now. This will require you to pay tax now on the amount being converted to a Roth IRA but will result in any further gain in the converted funds to be tax-free. 

  • Plan Your Deductions and Gifts Now.

If the “Build Back Better” Act passes, the SALT deduction may increase. This means that some who were taking the standard deduction since the SALT deduction may now be in a position where they are itemizing deductions again.

Therefore, charitable contributions may count. Also, planning what gifts you will give and to whom for the year is good practice at the beginning of the year. Planning and staying organized is a good way to operate, especially for 2022 where things may be set to change.

  • Open or Contribute to Health Savings Account.

If you have a high deductible healthcare plan, open a Health Savings Account (HSA). These nifty savings tools offer a triple tax advantage unlike anything else you can save into. The contributions you make aren’t taxed. The growth of the money in these accounts is never taxed. And when you use the money for qualified medical expenses, you won’t pay taxes either.

What’s even better, is that you can save into an HSA and apply previous years’ medical expenses to it. In other words, save and let your money grow. Keep track of your medical costs and apply them to your HSA later. 

After age 65, your HSA funds can be used for non-medical expenses without the 10 percent penalty as well. Making this another potential source of tax-free retirement income.

No one wants to pay more in taxes than is required. Therefore, make sure your tax strategy is in place at the beginning of the tax year so you can take advantage of all the tax-savings opportunities available to you. A lifetime of saving on taxes means that you keep more of your money to grow and direct toward people, causes, and purpose that means something to you.


Prosperity Road, LLC (“PR) is a registered investment adviser offering advisory services in the State of California and in other jurisdictions where exempted. Registration does not imply a certain level of skill or training. All written content provided is for informational purposes only. Opinions expressed herein are solely those of PR, unless otherwise specifically cited. PR does not endorse any financial products nor does it profit from mentioning any specific products or services. Material presented is believed to be from reliable sources and no representations are made by our firm as to another parties’ informational accuracy or completeness. All information or ideas provided should be discussed in detail with an advisor, accountant, or legal counsel prior to implementation.