As the federal tax deadline approaches, there are still ways to reduce your tax bill or increase your refund. While it may be too late to take advantage of certain tax planning strategies, such as contributing to a 401(k) or using tax-loss harvesting, there are still options available. One effective strategy is to make a pretax contribution to an individual retirement account (IRA). This contribution can help reduce your adjusted gross income and potentially provide an immediate deduction, regardless of whether you itemize your tax breaks.
Another option to consider is making a contribution to a Roth IRA. While this does not offer an upfront tax break, the money in the account grows tax-free. Depending on your tax bracket, putting money into a Roth IRA could be more beneficial, especially for those in the 10% or 12% tax brackets. Additionally, married couples filing jointly can take advantage of a spousal IRA, allowing a nonworking spouse to contribute to a separate Roth or traditional IRA.
For those with a high-deductible health insurance plan, contributing to a health savings account (HSA) before the tax deadline can provide multiple benefits. HSAs offer upfront deductions for contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses. Individuals aged 55 and older can save an additional $1,000, making it a valuable option for maximizing last-minute tax savings.
Before making any decisions regarding IRA or HSA contributions, it is essential to assess your short- and long-term financial situation. Consulting with a certified financial planner or tax professional can help you determine the most effective strategy based on your individual circumstances. It is crucial to consider possible tax consequences and weigh the benefits of each option before making a final decision.
By exploring these last-minute tax-saving opportunities, individuals can take proactive steps to reduce their tax liability and make the most of their financial resources. As the tax deadline approaches, it’s important to consider all available options and make informed decisions to maximize your tax savings potential.