As tax season arrives, many individuals find themselves seeking ways to minimize their tax liabilities or amplify their potential refunds. Particularly for W-2 employees, strategies can be limited once the clock strikes midnight on December 31. According to Catherine Valega, a certified financial planner in the Boston area, the window for making significant tax adjustments for the past year is narrowing, leaving taxpayers with a pressing need to take advantage of the remaining opportunities before the tax deadline.
After the calendar year concludes, taxpayers miss the opportunity to implement various tactics that could improve their tax standing, such as increasing contributions to retirement accounts or making charitable donations. However, as experts highlight, there are still available avenues to explore before the April 15 deadline that can still yield tangible tax advantages.
Utilizing Health Savings Accounts
One of the most effective, yet frequently overlooked, strategies is the maximization of contributions to Health Savings Accounts (HSAs). For those with qualifying high-deductible health insurance plans, the contribution limit for 2024 is set at $4,150 for individuals and $8,300 for families. Taxpayers can make contributions up until the tax filing deadline and enjoy the benefits of tax deductions. Financial planner Thomas Scanlon emphasizes the simplicity of this option, stating that if one is eligible, the advice is straightforward: “Fund it and take the deduction.” Utilizing an HSA not only contributes to tax savings but also helps in planning for future medical expenses.
Another avenue for tax reduction involves contributions to Individual Retirement Accounts (IRAs). Similar to HSAs, taxpayers have the opportunity to contribute to their IRAs until the April deadline. The contribution limit for 2024 stands at $7,000, with an additional $1,000 allowed for investors aged 50 or older. Contributing to a traditional IRA can significantly lower one’s adjusted gross income, depending on personal earnings and participation in employer-sponsored retirement accounts. However, it’s essential to remember that while this strategy postpones taxes, the funds are eventually subject to income taxation and required withdrawals later.
Married couples filing jointly also have a valuable, albeit lesser-known, option at their disposal—spousal IRAs. This allows couples to contribute to a separate Roth or traditional IRA for a spouse who does not earn income. Assuming that the working spouse generates sufficient income, both partners can benefit from maximizing their pre-tax IRA contributions. This strategy effectively enables non-working spouses to take part in retirement savings and potential tax deductions, thereby enhancing overall financial security.
As the clock ticks toward the tax deadline, it is crucial for taxpayers to take a proactive stance toward their fiscal health. By leveraging HSAs, maxing out IRA contributions, and considering the advantages of spousal IRAs, individuals can navigate this tax season with confidence. Embracing these last-minute opportunities can mitigate tax liabilities and set the groundwork for a more secure financial future. With thoughtful planning and strategic execution, taxpayers can still optimize their tax outcomes before the deadline arrives.