Don’t overlook these tax moves that could save you thousands, experts say

With less than two weeks until the April 15 tax deadline, you may feel the need to prepare and file your return as quickly as possible. And these days, there are plenty of online filing services that can help you do that with just a few clicks.

But breathe. You still have plenty of time to make sure you’ve reduced your tax bill (or increased your refund) as much as possible before filing. For some taxpayers, this could mean making a last-second contribution to tax-advantaged retirement accounts. It might also mean taking a few minutes to click through to the deductions page in your tax software to make sure you’re not leaving money on the table.

For almost everyone, making sure the dots are dotted and the t’s crossed is worth it — and for some, it could mean saving thousands of dollars. Here are three tax measures that experts say people tend to overlook.

If you want to act now to save on your 2023 taxes, there aren’t many steps left to take between now and tax day.

One notable exception: You have until the tax deadline to make previous year contributions to tax-advantaged retirement and savings plans, including traditional IRAs, SEP IRAs, and health savings accounts.

Contributions to these accounts are made with pre-tax money that is applied against your taxable income. If you have not reached your maximum contribution for 2023, you can retroactively direct funds to these accounts for the 2023 tax year. For individuals under age 50, the contribution limits are $22,500 for a 401(k), $6,500 for an IRA, and $3,850 (for solo coverage) or $7,750 (for family coverage) for an HSA.

This allows you to kill two birds with one stone, says Mark Jaeger, vice president of tax operations at TaxAct. “You can spend money to save money on taxes,” he says. “You can contribute to your pension and also get the added benefit of reducing your tax bill.”

Chances are, no matter what tax software you use, it will ask you a series of questions to see if you qualify for some popular deductions.

If you have children or other dependents, for example, your tax preparation software will likely direct you to the Child Tax Credit and the Child and Dependent Care Credit. Students or parents of students will likely be guided toward American Opportunity and Lifetime Learning credits.

“You can’t screw it up,” Jaeger says. “You won’t enter something wrong and the program won’t give you the child tax credit. Those are the ones you know you’ll qualify for every year.”

But some credits, he says, you may have to pursue.

“One of the less common loans that I like to highlight is the savings loan,” says Jaeger. “People think they already get a tax break by contributing to their 401(k) plan at work. But you can get a double benefit if your (adjusted gross income) is below a certain threshold.”

For the 2023 tax year, individual filers with an AGI of $36,000 or less (or married joint filers with $73,000 or less) can claim the credit, which, depending on your income, is worth 10%, 20% or 50% of the value of your annual contribution.

For filers who itemize deductions, health care costs are another common oversight, says Ed deHaan, an accounting professor at the Stanford Graduate School of Business.

You can deduct qualified medical expenses as long as they exceed 7.5% of your taxable income, “and for many retirees, their costs exceed that amount,” says deHaan. “Research shows there is widespread underutilization of (the health care deduction), particularly among retirees who need the money the most.”

If you’re not sure how much you spent on healthcare in 2023, ask your healthcare providers and pharmacies for statements. “Luckily, most of them can provide you with an end-of-year statement,” says de Haan.

If you have a side hustle or small business, you probably know that there are many tax deductions available, including the cost of supplies, the square footage of a dedicated home office space, and the mileage accrued on your work vehicle .

But remember, you need to have the documentation to support all of these inferences — a convention that many scammers may not think about, says deHaan.

“What I’ve heard is that many people don’t keep adequate records of their personal affairs,” he says. “If you are audited, the IRS will certainly ask you to account for any material expenses you have incurred against you. income you have. »

Ideally, you have separate credit and bank accounts for your small business or side hustle and have a filing system for your invoices and receipts. But even a much simpler approach could help you keep your records in order and get you out of trouble in the event of an audit.

“What I recommend to people is just get in the habit of taking a picture of a receipt, sticking it in a folder on your phone, and then come tax time you’ll have it there.” , explains deHaan. “If you ever get audited, it might be a disaster, but at least you have the records. And the nice thing about a photo is that the time and location are recorded.”

As a general rule, the IRS recommends that all taxpayers keep all relevant documents for three years from the date they are filed – a process that is made even easier if you keep digital records, de Haan adds.

“To be on the safe side, digital storage space is cheap,” he says. “A digital shoebox full of receipts (is something) you can keep forever. A messy accounting system is better than no accounting system.”

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