3 Last-Minute Tips To Maximize Deductions (And Minimize Taxes Owed)

If you are like most, you’re scrambling last minute to submit your taxes. While most of the important tax transactions happen during the calendar year, there are still a few things you can do up to the filing date of April 15th to maximize your tax savings.

1. Contribute to your IRA: You have until tax day to contribute to your IRA for the prior year. This means that you can contribute towards your 2023 tax year up until 4/15/24. The annual contribution limit for 2023 is $6,500, or $7,500 if you're age 50 or older. This can be especially impactful if you have a SEP IRA. An employer can contribute to an employee’s SEP-IRA up to either 25% of the employee’s compensation or $66,000, whichever is less. Up to $330,000 of an employee’s compensation may be considered. These contribution limits apply to both employees of small businesses and the self-employed and can equal major tax benefits.
2. Fund Your HSA: Similar to the IRA, you can still max out your health savings account (HSA) up until Tax Day. HSA accounts are a type of savings account that lets you set aside money on a pre-tax basis to pay for qualified medical expenses. Not only can you deduct your contributions, but your withdrawals are always tax-free as long as you use them for qualifying medical expenses. The maximum 2023 contribution is $3,850 for self-only coverage or $7,750 for family coverage, plus an extra $1,000 if you're 55 or older. Keep in mind that any employer contributions you receive count toward those limits. To fund an HSA, you need to have a high-deductible health plan (HDHP).
3. Itemize your deductions: This may not make sense for everyone, but it’s worth checking. Claiming the standard deduction is easier, because you don’t have to keep track of expenses. The 2023 standard deduction is $13,850 for single taxpayers ($20,800 if you’re filing as head of household) and $27,700 for married taxpayers. Itemized deduction is a dollar-for-dollar deduction that differs from taxpayer to taxpayer. The itemized deduction amount is determined by adding all applicable deductions and subtracting the sum from your taxable income. Common itemized deductions include charitable donations, state and local taxes, gambling losses, home mortgage interest and unreimbursed medical and dental expenses (AGI threshold is 7.5%). The majority of tax payers take the standard deduction, but if you have high amounts in any of these itemized deduction categories, it’s worth comparing both methods.

It can be tempting to just get your taxes over with and send them in - but you can save significant money by taking a second look. Go back over your taxes one more time to be sure you’ve taken the maximum deductions to get your taxable income as low as possible.

By Liz Frazier, Contributor