Maximize Your Tax Savings: Last-Minute Strategies for 2024

As the tax season unfolds, many Americans anticipate refunds, while others face unexpected payments. Completing tax returns may reveal that some owe a lump sum to the IRS or must set up a payment plan stretching months or years. However, there are still opportunities to lower tax liabilities and bolster retirement savings.

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Take Advantage of 2024 IRA Contributions

While contributions to workplace retirement plans like 401(k)s must be made by December 31 of the previous year, IRAs offer more flexibility. Taxpayers can contribute to a 2024 IRA until the tax deadline on April 15, 2025.

You can deposit up to $7,000 into an IRA if you were under 50 by December 31, 2024. Those older than 50 can contribute up to $8,000. Contributions to a traditional IRA reduce taxable income, thus lowering tax liability. Note that Roth IRA contributions do not provide this benefit, as they are made with after-tax dollars.

This option requires extra cash availability, which may not be feasible for everyone. Nonetheless, if you can set aside funds, consider making a prior-year IRA contribution. This strategy can help direct funds towards your future rather than to the IRS.

To begin, determine your contribution amount, keeping annual limits in mind and subtracting any contributions already made in 2024. If you have maximized your IRA for the past year, prior-year contributions may not be an option.

Next, contact your IRA provider to understand how to execute a prior-year contribution correctly. Ensuring that the contribution is labeled for the 2024 tax year is crucial.

Prior-Year Contributions for Health Savings Accounts (HSAs)

If you cannot make a prior-year IRA contribution due to maxing out last year, consider contributing to a health savings account (HSA), provided you meet eligibility requirements. Similar to IRAs, HSA contributions can reduce taxable income, allowing funds to be invested for retirement rather than paid to the government. Additionally, HSAs can be used tax-free for medical expenses at any age.

To contribute to an HSA, you must have had a high-deductible health insurance plan, which required a deductible of at least $1,600 for individuals or $3,200 for families last year. Maximum contributions allowed were $4,150 for individuals and $8,300 for families, with an extra $1,000 for those aged 55 and older.

Use your 2024 health insurance plan to determine eligibility for HSA contributions, not your current plan. If you contributed to an HSA in the previous year, subtract those amounts from the annual limit to see how much more you can add.

If you’re considering a prior-year IRA or HSA contribution, make sure to complete this before filing your 2024 tax return. Waiting until after filing will necessitate an amended return, which incurs additional costs.

Discover Hidden Social Security Boosts

Many Americans lag behind on retirement savings, but some lesser-known “Social Security secrets” can help increase retirement income. For instance, one simple strategy could add as much as $22,924 to your annual income. Learning how to maximize Social Security benefits could help you retire with greater confidence.

View the “Social Security secrets” »

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