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Essential Year-End Tax Strategies for USAA Employees: What You Need to Know Before 2023

Here are some things for USAA employees and retirees to consider as they weigh potential tax moves between now and the end of the year.

1. Defer income to next year
USAA employees must consider opportunities to defer income to 2023, particularly if you think you may be in a lower tax bracket then. For example, you may be able to defer a year-end bonus or delay the collection of business debts, rent, and payments for services. As a USAA employee, doing so may enable you to postpone payment of tax on the income until next year.

2. Accelerate deductions
USAA employees and retirees should also look for opportunities to accelerate deductions into the current tax year. If you itemize deductions, making payments for deductible expenses such as medical expenses, qualifying interest, and state taxes before the end of the year (instead of paying them in early 2023) could make a difference on your 2022 return.

3. Make deductible charitable contributions
As a USAA employee, if you itemize deductions on your federal income tax return, you can generally deduct charitable contributions, but the deduction is limited to 50% (currently increased to 60% for cash contributions to public charities), 30%, or 20% of your adjusted gross income (AGI), depending on the type of property you give and the type of organization to which you contribute. (Excess amounts can be carried over for up to five years.)

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4. Bump up withholding to cover a tax shortfall
As a USAA employee, if it looks as though you will owe federal income tax for the year, consider increasing your withholding on Form W-4 for the remainder of the year to cover the shortfall. Time may be limited for USAA employees to request a Form W-4 change and for their employers from USAA to implement it in time for 2022. The biggest advantage in doing so is that withholding is considered as having been paid evenly throughout the year instead of when the dollars are actually taken from your paycheck. This strategy can be implemented by USAA employees to make up for low or missing quarterly estimated tax payments.

5. Save more for retirement
Deductible contributions to a traditional IRA and pre-tax contributions to a USAA-sponsored retirement plan such as a 401(k) can reduce your 2022 taxable income. As a fortune 500 employee, if you haven't already contributed up to the maximum amount allowed, consider doing so. For 2022, USAA employees can contribute up to $20,500 to a 401(k) plan ($27,000 if you're age 50 or older) and up to $6,000 to traditional and Roth IRAs combined ($7,000 if you're age 50 or older).* The window to make 2022 contributions to a USAA-sponsored plan generally closes at the end of the year, while you have until April 18, 2023, to make 2022 IRA contributions.

*Roth contributions are not deductible, but Roth-qualified distributions are not taxable.

6. Take the required minimum distributions
If you are a USAA employee age 72 or older, you generally must take required minimum distributions (RMDs) from traditional IRAs and USAA-sponsored retirement plans (special rules apply if you're still working and participating in USAA's retirement plan). You have to make the withdrawals by the date required — the end of the year for most individuals. The penalty for failing to do so is substantial: 50% of the amount that wasn't distributed on time. As a fortune 500 employee, making these distributions in a timely manner is essential as to avoid the late penalty.

7. Weigh year-end investment moves
USAA employees and retirees shouldn't let tax considerations drive investment decisions. However, it's worth considering the tax implications of any year-end investment moves that you make. For example, if you have realized net capital gains from selling securities at a profit, you might avoid being taxed on some or all of those gains by selling losing positions. As a USAA employee, any losses over and above the number of your gains can be used to offset up to $3,000 of ordinary income ($1,500 if your filing status is married filing separately) or carried forward to reduce your taxes in future years.

Tags: Financial Planning , Tax , Retirement , 2022

What types of retirement savings plans does USAA offer?

USAA offers a 401(k) plan as part of its retirement savings options for employees.

How does USAA match employee contributions to the 401(k) plan?

USAA matches employee contributions up to a certain percentage, typically a dollar-for-dollar match up to a specified limit.

Can employees at USAA choose their investment options within the 401(k) plan?

Yes, USAA allows employees to choose from a variety of investment options within the 401(k) plan to suit their individual retirement goals.

What is the vesting schedule for USAA's 401(k) matching contributions?

USAA has a vesting schedule that determines how long an employee must work at the company to fully own the matching contributions made by USAA.

How can USAA employees access their 401(k) account information?

USAA employees can access their 401(k) account information through the USAA employee portal or by contacting the HR department.

Does USAA offer any educational resources for employees regarding their 401(k) plans?

Yes, USAA provides educational resources and workshops to help employees understand their 401(k) plans and make informed investment decisions.

What is the minimum contribution percentage required for USAA employees to participate in the 401(k) plan?

USAA typically requires employees to contribute a minimum percentage of their salary to participate in the 401(k) plan, which may vary by plan specifics.

Are there any fees associated with USAA's 401(k) plan?

Yes, USAA’s 401(k) plan may have administrative fees, which are disclosed in the plan documents provided to employees.

Can USAA employees take loans against their 401(k) savings?

Yes, USAA allows employees to take loans against their 401(k) savings, subject to specific terms and conditions outlined in the plan.

What happens to a USAA employee's 401(k) if they leave the company?

If a USAA employee leaves the company, they have several options for their 401(k), including rolling it over to an IRA or a new employer's plan, or cashing it out.