Tax season officially starts on January 29, 2024. However, we want to give you a head start on some great tax savings before tax season begins. So, before you push panic button, let’s use some time-tested techniques to lower that tax bill. Here are some ways to do just that:
Self-Employed? Establish a Retirement Plan for Your Future & Get Tax Benefits Today. If you’re self-employed, it’s never too late or too soon to set up a retirement plan. Some plans must be established before December 31, but you can still fund the account PRIOR TO APRIL 15, 2024 and still claim the tax benefit on your 2023 tax return.
Maximize Health Savings Account (HSA) Contributions You have until April 15, 2024 If you have an HSA qualified health insurance plan, one way to lower your taxes is to contribute the maximum allowed in your HSA (generally $3,850 for individual coverage or $7,750 for family, $1,000 additional catch-up contribution allowed if age 55 or older). HSA contributions can be deducted through payroll, but you can also make contributions directly to ensure the maximum is made. In addition to providing a tax deduction, HSA dollars carry over indefinitely and are yours even if you switch jobs or retire. They can also be distributed without penalty once the account owner is on Medicare, so if you have the funds, it would be a shame to miss out on this tax savings opportunity while also saving for future healthcare costs.
Don’t Miss Employer 401(k) Match Opportunities Everyone, and I mean EVERYONE, with an employer that offers a 401(k) match should at least contribute the amount required to get the maximum match. An employer 401(k) match is like getting a 100% return on your money the first year invested. If you aren’t contributing enough to receive the full employer match, you should START IMMEDIATELY to do so. Not fully utilizing this employer benefit is essentially passing on free money.”
Maximize Roth Contribution Opportunities Do this by April 15, 2024. If you haven’t reached your Roth IRA contribution limit for the year, it might make sense to increase your contributions in order to take full advantage of this year’s opportunity to put away retirement savings dollars. Keep in mind, you pay taxes at the time of contribution to a Roth IRA and then 100% of the Roth contribution remains in the account growing tax-free for the benefit of the taxpayer.
Review the Best Filing Status Decide if you should do a joint tax return or married filing separately… especially if you have a spouse that has tax issues or you want to make sure your tax issues do not negatively affect your spouse’s tax results. Sometimes, some spouses need to file as INNOCENT SPOUSE designation.
Review Who You Can Claim as a Dependent Claim all of your dependents! If you provided over half of the person’s total support, whether the person lives in your house or not, claim them. If a person is incarcerated, you cannot claim them as your dependent. However, an incarcerated person should file a tax return even if they only have $1 of income, so that they can qualify for any possible stimulus checks that may come.
Remember the Gifts From Last Year to Reduce Future Estate Tax Do not forget that you can give up to $17,000 to as many beneficiaries as you would like each year without paying a gift tax or decreasing your lifetime estate tax exclusion amount. This is a great way to gift your wealth without triggering a tax impact.
Revisit Risk Tolerance and Portfolio Diversification. Investors should weigh their risk tolerance and ensure they always have ample cash on hand. Further, a tax-efficient financial plan that includes a diversified portfolio can give confidence that long-term financial goals will remain within reach through this period of extreme uncertainty.
AVOID TAX SCAMS The IRS IS NOT going to call you on the phone demanding payment. If you receive a call from someone purporting to be with the IRS, and they are demanding payment NOW, IMMEDIATELY HANG UP THE TELEPHONE. The call is frequently perpetrated by someone with a foreign accent calling someone who is elderly. IT IS A VERY COMMON SCAM used to victimize people who want no trouble of any kind, especially with the IRS. The IRS are not monsters, and do not do those kinds of calls.
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