Tax deadline day is approaching and with that I wanted to share some tax-saving strategies. These are all common actions we take to reduce client tax bills. Although none of these are groundbreaking new ideas, they are worth double checking before you file.
IRA Contribution: you have until the tax filing date (4/15/2024) to make an IRA contribution for 2023. The max for 2023 is $6,500, or $7,500 if over 50.
Contributing to an IRA may not always result in a tax deduction if you have a retirement plan at work, or using a Roth IRA, so make sure you double check before blindly making an IRA contribution.
2. Health Savings Account (HSA) contribution: again, you’re allowed to contribute to an HSA for 2023 up until 4/15/24.
HSAs are triple-tax-savings; you get a deduction on money you contribute, no annual taxes on dividends or gains, and then no tax on withdrawals if the money is used for qualified health expenses.
In order to open and fund an HSA you have to be on a high-deductible health plan. Find more info about what qualifies as a HDHP here: link.
Do you have an HSA at work and contributed throughout the year? Make sure you + employer contributions maxed for 2023. This amount is $3,750 for individual coverage or $7,750 for family. (Add an additional $1000 to these amounts if you’re over 50).
Some clients find they contributed through their work HSA, but not the max. In this case you can open your own separate HSA (I do mine through Fidelity) and make a lump sum contribution to max out for 2023. This achieves tax savings with no account opening or maintenance costs.
3. 529 contributions: a tax-advantaged education savings account
First and foremost, the main decision when making a 529 contribution has to be whether or not you want to help with future education costs for a family member.
If you’re not 100% sure on this, then I would steer you away from the 529.. Tax savings on 529s are a good benefit, but they are not the end all be all. You save on state taxes (so 5.75% in GA) and get tax-free growth if the money is used for education expenses.
4. SEP-IRA: a small business retirement plan
Just like other IRAs, you can contribute to a SEP IRA up until taxes are filed for your business. If you have self employment income you should explore whether or not you can open and fund a SEP-IRA. This reduces your current tax bill and helps you accumulate savings for retirement.
If you’ve got a side hustle (like Uber, Doordash, photography, etc.) you can open a SEP-IRA for that business.
Let me know if you have any specific questions. Good luck!
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