With tax season in full swing, folks are understandably on the lookout for ways to lighten their 2024 tax burden or possibly land a bigger refund. However, if you’re among the ranks of “W-2 employees”—those of you who earn wages—it seems that your options are somewhat limited, according to experts.
Catherine Valega, a Boston-based certified financial planner and enrolled agent, and the founder of Green Bee Advisory, points out that after December 31, the window for making significant tax moves for the previous year narrows considerably. “There are very few options left,” she explains.
Of course, with the year wrapped up, actions like upping your 401(k) contributions, making charitable donations, or engaging in tax-loss harvesting are off the table.
Yet, as the April 15 tax deadline looms, there’s still a handful of possibilities worth considering. Here are three strategies that might fit the bill.
#### 1. Contribute to Your Health Savings Account
If you haven’t yet hit the maximum contribution limit for your health savings account (HSA) for 2024, there’s still a chance to do so by April 15, and that could mean a tax break for you. The contribution limits this year stand at $4,150 for individual coverage and $8,300 for family plans. Do remember, though, that you need to be on a qualifying high-deductible health plan to make these contributions.
“The HSA is straightforward,” says Thomas Scanlon, a CFP at Raymond James in Manchester, Connecticut. “If you’re eligible, go ahead and fund it, then take the deduction.”
#### 2. Make a Pre-Tax IRA Deposit
The same April 15 deadline also applies to your 2024 individual retirement account (IRA) contributions. You can set aside up to $7,000, or $8,000 if you’re over 50, this way. Depending on your income and any existing workplace retirement plans, you might be able to claim a deduction for pre-tax IRA contributions.
This can help reduce your adjusted gross income for 2024. However, it’s good to remember that you’ll face regular income taxes and will need to take mandatory withdrawals eventually, as Andrew Herzog, a CFP and associate wealth manager at The Watchman Group in Plano, Texas, notes. “A traditional IRA simply delays taxation,” he cautions.
#### 3. Leverage a Spousal IRA
For married couples filing jointly, there’s an often overlooked option called a spousal IRA. This strategy allows you to set up a separate Roth or traditional IRA for a nonworking spouse.
It’s possible to fully fund a pre-tax IRA for both partners as long as the working spouse’s income covers it. Plus, you can claim deductions for both contributions. Whether you’re making one pre-tax IRA contribution or both, it’s crucial to consider your long-term financial and tax planning goals, experts advise.
By weighing these options, you might just find a way to make the most of your tax situation this year.
