As we approach the tax filing deadline of April 15, individuals may find themselves scrambling for ways to optimize their tax returns and uncover potential refunds. While many taxpayers—especially those who receive W-2 wages—might feel limited in their options, there are still a few critical steps you can take to alleviate your tax burden. With professional insight from financial planners, we’ll explore viable strategies that can provide benefits even when time is short.
It’s essential to recognize that once the calendar year draws to a close, most avenues for tax adjustments close with it, particularly for W-2 employees. As certified financial planner Catherine Valega points out, after December 31, the ability to make significant tax-saving moves becomes severely restricted. It’s crucial for big earners to complete certain transactions before year-end to reap the rewards during tax season.
While opportunities may seem scarce for those looking to enhance their tax picture for the previous year, proactive strategies still exist—often hinging on contributions to certain accounts prior to the annual tax filing deadline.
One of the most effective tools available for reducing your taxable income is the Health Savings Account (HSA). HSA contributions are not only tax-deductible but grow tax-free, providing a double-edged sword in your financial arsenal. For individuals with eligible high-deductible health plans, there’s an opportunity to deposit funds until April 15, allowing you to contribute up to $4,150 for self-coverage or $8,300 for family plans. Financial experts emphasize the simplicity and immediate benefits of this option. “If you qualify, contribute to the HSA and take advantage of the deduction,” advises CFP Thomas Scanlon.
Another area worth exploring is the Individual Retirement Account (IRA). Taxpayers can contribute up to $7,000 for the 2024 tax year, with an additional catch-up contribution of $1,000 for those over 50. This can offer a significant deduction that lowers your adjusted gross income, thus lowering your taxable bracket and potentially increasing your refund. It’s important to consider whether your workplace offers a retirement plan, as this might affect how much you can deduct.
One aspect that often flies under the radar is the spousal IRA option, which allows non-working spouses to have their own separate IRA account, either traditional or Roth. This means that married couples can effectively double their contributions and thereby enhance their tax position. For those looking to maximize contributions, this can be a powerful tool.
While the clock may be ticking down to the tax filing deadline, it is vital that taxpayers take conscious steps to manage their financial future proactively. Exploring the intricacies of HSAs and IRAs, particularly the lesser-known spousal IRA, can significantly aid in tax optimization.
Although W-2 employees might find themselves with limited moves as they stamp their documents this tax season, by comprehending the available options and acting promptly, they can still position themselves favorably in the cutthroat world of taxes. Staying informed and organized is the key to making tax time not only manageable but also an opportunity for financial improvement.