7 Tax Moves to Make Before the New Year

Reading Time: 3 minutes

Can you believe that 2023 is almost over?  Before we bring this year to a close, there are some tax-related things you need to do.  Taking our advice can lead to a lower tax bill and extra cash in your wallet if you move quickly.

Beef up your retirement savings

There are a couple good reasons to contribute as much as you can to your 401k before the year is out.  The first being that any contributions you make will lower your taxable income which in turn will reduce your tax bill.  For 2023, the contribution limit is capped at $22,500.  However, those aged 50 or older are allowed make catch-up contributions up to $7,500.  Another good reason to beef up your retirement savings is because many employers offer to match a portion of your contributions.  Commonly, they’ll match 50% of whatever you put in, up to 6% of your salary. That’s free money you’re leaving on the table if you’re not contributing enough to receive the full benefit.

Also consider investing in an IRA. If you contribute to a traditional IRA, your contributions may be tax deductible and your money grows tax-deferred until retirement. If you have a Roth IRA, your distributions in retirement are tax-free. The contribution limit for 2023 is $6,500. For individuals aged 50 or older, the catch-up contribution limit is $1,000. The deadline for 2023 IRA contributions is April 15, 2024.

Contribute to an HSA

Health Savings Accounts (HSA) allow you to save money for medical expenses not covered by your plan such as deductibles and copays.  The best part is your contributions are 100% tax deductible.  To qualify for an HSA, you must be enrolled in a high deductible health plan.  If your plan covers just you, you’re allowed to contribute up to $3,850 to an HSA.  For family coverage, you can contribute up to $7,750.  As a bonus, those 55 or older have an additional $1,000 catch-up contribution limit.  When you file with ezTaxReturn, we make it easy to report your HSA contributions on your tax return.

Spend your FSA balance so you don’t lose it

If you have a Flexible Spending Account (FSA), you must use your balance by December 31^st or risk losing it.  Some employers offer a grace period but you’re better off using it up to be on safe side.  Here are a handful of ways you can spend your FSA dollars:

• Blood pressure monitors
• Breast pumps and supplies
• Contact lenses and solutions
• Eyeglasses
• Hearing aids and batteries

Sell bad stocks to offset gains

Sometimes you pick stocks and they do well, other times your decision blows up in your face.  If you own any stocks that have lost money, you can sell them and deduct up to $3,000 on your tax return.  This can help offset your capital gains and other income.  Any losses exceeding the $3,000 limit can be carried over to following years.

Gather your medical and dental bills

If you, your spouse or dependent had costly medical or dental expenses this year, hold on to the receipts.  You may be able to deduct a portion of your expenses on your tax return if you itemize.  However, you can only deduct the amount that exceeds 7.5% of your adjusted gross income.  Deductible expenses include:

• Payments to doctors, dentists, surgeons, chiropractors, psychiatrists, psychologists, and other medical practitioners
• Hospital or residential nursing home care
• Acupuncture treatments or inpatient treatment at a center for alcohol or drug addiction
• Insulin and prescription drugs
• False teeth, reading or prescription eyeglasses, contact lenses, hearing aids, crutches, wheelchairs, and service animals

For a full list of expenses you can or cannot deduct, read IRS Publication 502.

Take your required minimum distributions (RMD)

If you have a traditional IRA, SEP IRA, SIMPLE IRA or an employer sponsored retirement plan, it’s important to know when to start taking your RMD’s to avoid costly penalties.  Starting in 2023, you must start taking withdrawals from your retirement accounts when you turn 73.  Those who turned 72 in 2022 were supposed to take their first RMD by April 1, 2023 and will need to take another one before the end of the year.  Previously, there was a 50% excise tax for not taking your full RMD. However, that has changed. Under the new rules, you will now pay a 25% tax on the amount that was not withdrawn.

Pre-register with ezTaxReturn for a tax time discount

Everyone enjoys saving money when they can.  Pre-register now with ezTaxReturn and you’ll receive a 20% OFF discount when you do your taxes with us.  There are no coupon codes to remember.  Just use the email address you pre-registered with and the discount will be automatically applied.

File your taxes fast and ez. Biggest possible refund, guaranteed.

The articles and content published on this blog are provided for informational purposes only. The information presented is not intended to be, and should not be taken as, legal, financial, or professional advice. Readers are advised to seek appropriate professional guidance and conduct their own due diligence before making any decisions based on the information provided.