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With tax season well underway, you may be eager for strategies to reduce your 2024 taxes or boost your refund. However, there are limited options, especially for so-called “W-2 employees” who earn wages, experts say.
After Dec. 31, there are “very few” tax moves left for the previous year, according to Boston-area certified financial planner and enrolled agent Catherine Valega, founder of Green Bee Advisory.
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Once the calendar year ends, it’s too late to claim a tax break by boosting 401(k) plan deferrals, donating to charity or tax-loss harvesting.
But there are a few opportunities left before the April 15 tax deadline, experts say. Here are three options for taxpayers to consider.
1. Contribute to your health savings account
If you haven’t maxed out your health savings account for 2024, you have until April 15 to deposit money and score a tax break, experts say.
For 2024, the HSA contribution limit is $4,150 for individual coverage or $8,300 for family plans. However, you must have an eligible high-deductible health insurance plan to qualify for contributions.
“The HSA is easy,” said CFP Thomas Scanlon at Raymond James in Manchester, Connecticut. “If you are eligible, fund it and take the deduction.”
2. Make a pre-tax IRA deposit
The April 15 deadline also applies to individual retirement account contributions for 2024. You can save up to $7,000, plus an extra $1,000 for investors age 50 and older.
You can claim a deduction for pre-tax IRA contributions, depending on your earnings and workplace retirement plan.
The strategy lowers your adjusted gross income for 2024, but the account is subject to regular income taxes and required withdrawals later, said CFP Andrew Herzog, associate wealth manager at The Watchman Group in Plano, Texas.
“A traditional IRA simply delays taxation,” he added.
A traditional IRA simply delays taxation.
Andrew Herzog
Associate wealth manager at The Watchman Group
3. Leverage a spousal IRA
If you’re a married couple filing jointly, there’s also a lesser-known option, known as a spousal IRA, which is a separate Roth or traditional IRA for nonworking spouses.
Married couples can max out a pre-tax IRA for both spouses, assuming the working spouse has at least that much income. It’s possible to claim a deduction for both deposits.
But whether you’re making a single pre-tax IRA contribution or one for each spouse, it’s important to weigh long-term financial and tax planning goals, experts say.