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With tax season well underway, you could be looking forward to methods to scale back your 2024 taxes or enhance your refund. Nevertheless, there are limited options, particularly for so-called “W-2 employees” who earn wages, consultants say.
After Dec. 31, there are “only a few” tax strikes left for the earlier yr, in accordance with Boston-area licensed monetary planner and enrolled agent Catherine Valega, founding father of Inexperienced Bee Advisory.
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As soon as the calendar yr ends, it is too late to say a tax break by boosting 401(k) plan deferrals, donating to charity or tax-loss harvesting.
However there are a number of alternatives left earlier than the April 15 tax deadline, consultants say. Listed below are three choices for taxpayers to think about.
1. Contribute to your well being financial savings account
If you have not maxed out your health savings account for 2024, you’ve till April 15 to deposit cash and rating a tax break, consultants say.
For 2024, the HSA contribution limit is $4,150 for particular person protection or $8,300 for household plans. Nevertheless, it’s essential to have an eligible high-deductible medical health insurance plan to qualify for contributions.
“The HSA is simple,” mentioned CFP Thomas Scanlon at Raymond James in Manchester, Connecticut. “In case you are eligible, fund it and take the deduction.”
2. Make a pre-tax IRA deposit
The April 15 deadline additionally applies to individual retirement account contributions for 2024. It can save you as much as $7,000, plus an additional $1,000 for buyers age 50 and older.
You’ll be able to claim a deduction for pre-tax IRA contributions, relying in your earnings and office retirement plan.
The technique lowers your adjusted gross earnings for 2024, however the account is topic to common earnings taxes and required withdrawals later, mentioned CFP Andrew Herzog, affiliate wealth supervisor at The Watchman Group in Plano, Texas.
“A conventional IRA merely delays taxation,” he added.
A conventional IRA merely delays taxation.
Andrew Herzog
Affiliate wealth supervisor at The Watchman Group
3. Leverage a spousal IRA
If you happen to’re a married couple submitting collectively, there’s additionally a lesser-known possibility, often called a spousal IRA, which is a separate Roth or conventional IRA for nonworking spouses.
Married {couples} can max out a pre-tax IRA for each spouses, assuming the working partner has no less than that a lot earnings. It is doable to say a deduction for each deposits.
However whether or not you make a single pre-tax IRA contribution or one for every partner, it is vital to weigh long-term monetary and tax planning targets, consultants say.
