
By Chris Bauchle
If you think 2023 is over and done with, think again!
There are numerous ways to dial-in your tax liability and try to increase your savings before the April 15th tax filing deadline! Here are some of the top money moves to make as you begin gathering documents and planning for a potential tax bill or tax refund.
1. Contribute to your IRAs
Did you save the full $6,500 ($7,500 if you’re over age 50) in your IRA and your spouse’s IRA? The IRS gives taxpayers until April 15th to maximize contributions for the previous year. The type of IRA you should contribute to depends on your specific plan.
Traditional IRA
- Receive a tax deduction when you contribute and tax-deferred growth
- If you’re an Active Participant in an employer-sponsored retirement plan, you must have a Modified Adjusted Gross Income (MAGI) under the following limits to receive the full tax deduction for 2023:
o Single: $73K
o Married Filing Jointly: $116K
Roth IRA
- Receive tax free growth on your contributions if your MAGI is under the following:
- o Single: $138K
- o Married Filing Jointly: $218K
Backdoor Roth IRA
- A known tax loophole to fund a Roth IRA, even if you’re over the income limit
SEP-IRA
- If you own a small business, you can have it contribute to a Simplified Employee Pension (SEP) IRA on your behalf. SEPs are easy to set-up and contribution amounts are limited to the lesser of $66K or 25% of compensation
2. Contribute to your HSA
Health Savings Accounts are the one account with a triple-tax-advantage! Contributions are tax-deductible, growth is tax-deferred, and distributions are tax-free if used for qualified medical expenses. This can be a significant addition to your retirement plan.
You can save up to $3,850 for single coverage and $7,750 for family coverage in 2023. Those 55 or older can contribute an extra $1,000 every year. Even if you contribute through payroll deductions, you can top-off your HSA by using checking or savings account dollars before April 15th.
Don’t forget to invest your HSA and let those triple-tax-advantaged dollars compound!
3. Contribute to a 529 College Savings Plan if your state allows it
A 529 is a tax-advantaged savings plan originally designed to help pay for college. In recent years, qualified education expenses have expanded to the following:
- K-12 tuition at an in-state private, public, or religious school limited to $10K per beneficiary per year
- College tuition, books, fees, supplies, and certain room/board
- Certain registered apprenticeship programs
Most states give a tax deduction or tax credit for contributions up to a specific dollar amount. For example, Indiana gives a 20% tax credit on contributions up to $7500. Contributions can be made for the preceding calendar year, potentially putting a cool $1500 back in your pocket at tax time!
Lots of firefighters tip the IRS every year because they don’t know what they don’t know about taxes. These are just 3 potential opportunities to maximize your savings while minimizing your tax bill. You should take full advantage of every financial opportunity available to you – your family and your future self will thank you.
Chris Bauchle is a career firefighter with the Indianapolis (IN) Fire Department. He is a CERTIFIED FINANCIAL PLANNER™, holds a Master’s degree in Finance, and has served well over 100 firefighter families as a financial advisor.
More educational content can be found at firefighterfinancialadvisor.com, where you can subscribe to his quarterly newsletter and be notified of future FirefighterNation articles.
Firefighterfinancialadvisor.com is an affiliated entity of Chris Bauchle, a Wellington Wealth Strategies advisor. Advisory services are offered through Wellington Wealth Strategies, an independent investment advisory firm. Wellington Wealth does not offer tax or legal advice. This is intended for informational purposes only and shall not be construed as individual investment advice. Information obtained from third-party sources is believed to be reliable though its accuracy is not guaranteed, and Wellington Wealth makes no representation or warranty as to the accuracy or completeness of the information, which should not be used as the basis of any investment decision. Opinions expressed in this commentary reflect subjective judgments of the author based on conditions at the time of writing and are subject to change without notice.
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