Procrastinator's Guide to Year-End Tax Savings, 2023 Edition
What You Need to Know
For clients who have put off executing tax savings strategies, now is the last chance to put plans into place.
The right moves can reduce their tax-year liability or boost their refund before next year.
Top options include maxing out pretax contributions, giving to charity and investing in clean energy initiatives.
The end of 2023 is officially upon us. And while tax season may be the furthest thing from most clients’ minds, for those who have put off executing tax savings strategies, now is the very last minute to act to minimize tax liability for the 2023 tax year.
Clients who have waited to implement tax strategies still have time to reduce their 2023 tax liability — or boost their refund before next year. Maxing out pretax contributions, giving to charity and investing in clean energy initiatives can all serve to boost refunds or reduce taxable income. While the tax savings options may seem simple, taking action today can have a big impact on clients’ tax liability when April rolls around.
Maximize Tax-Preferred Savings Contributions
Taxpayers still have time to add to their 401(k)s or health savings accounts.
In 2023, most taxpayers can contribute up to $22,500 in pretax dollars to an employer-sponsored retirement plan, with taxpayers who are age 50 or older able to make an additional $7,500 catch-up contribution. Taxpayers must make these employee contributions to retirement accounts by Dec. 31, although self-employed individuals with solo 401(k)s have until their tax filing deadline to make contributions as an employer.
Not only will maximizing pretax contributions reduce clients’ taxable income for 2023, but it can also help them take advantage of any employer-matching contributions to help grow their retirement savings.
Taxpayers can contribute up to $3,850 in pretax dollars to health savings accounts in 2023 ($7,750 for clients with family plans). HSA dollars don’t expire at the end of the year like some other types of health savings options. HSA dollars both reduce current tax liability and give clients a tax-free source for paying qualified health expenses. Clients who are age 55 or older can make an additional $1,000 catch-up contribution.
Taxpayers can also contribute up to $6,500 in pretax dollars to traditional individual retirement accounts ($7,500 for taxpayers age 50 and older). However, clients should remember that they have until their tax filing deadline in 2024 to make IRA contributions for 2023.
