Tackling taxes may not be the highlight of your year, but what if I told you there are savvy ways to make it less daunting? Let’s explore some strategic moves to not only ease the tax burden but also keep more of your hard-earned money.
- Maximize Your Work Retirement Plan
Take advantage of your workplace retirement options like 401(K), 403(B), or 457. By contributing up to $23,000 pre-tax, you not only reduce your taxable income but also watch your money grow tax-free until retirement. Self-employed individuals can take advantage of a solo 401(K) or SEP IRA plan.
- Explore the Benefits of an HSA Plan
Consider a Health Savings Account (HSA) for pre-tax savings on qualified health expenses. With potential tax-free growth, an HSA can be a smart choice, especially if you have a high deductible health plan. . For 2024, a self-only coverage plan can put away $4,150. For family coverage, you could put away $8,300.
- Optimize Roth IRA Contributions
If immediate tax savings aren’t your top priority, contribute up to $7,000 to a Roth IRA in 2024. Enjoy tax-free growth and tax-free distributions at retirement age of 59 ½. With a Roth IRA, you won’t have to worry about what future tax brackets may be.
- Practice Tax Loss Harvesting
In a market downturn, leverage Tax Loss Harvesting by selling investments with unrealized losses. Deduct up to $3,000 in investment losses against your ordinary income annually, with additional carryover benefits.
- Seize Retirement Catch-Up Contributions
If you’re over 50, maximize catch-up contributions. In 2024, you can contribute an extra $7,500 to your employer 401(K) and an additional $1,000 to your traditional or Roth IRA, providing an extra boost to your retirement savings.
- Consider Municipal Bonds and ETFs
For taxable investment accounts, explore municipal bonds for federal tax-free interest if you are in high tax brackets. Also, the use of low-cost Exchange-Traded Funds (ETFs) offer minimal turnover and potential capital gains advantages while investing in a taxable account.
- Invest in Your Child’s Future with a 529 Plan
Secure your child’s education with a 529 college savings account. Enjoy tax-free growth, tax-free distributions for educational expenses, and potential state-level tax deductions. 529 accounts can be used for private education, college, or even trade school.
By strategically navigating these tax-saving avenues, you not only ensure a smoother tax season but also pave the way for a more financially confident future. Remember, it’s not just about filing taxes; it’s about keeping more of your hard-earned money for yourself or family.
