The deadline for IRA contributions for the prior year is Tax Day, meaning there are a few more weeks to make a deposit into my individual retirement account. The IRA limit for 2023 is $6,500 per taxpayer (or $7,500 for those older than 50).
I can also contribute to my Health Savings Account, or HSA, until April 15. The limit for 2023 is $3,850 for individuals and $7,750 for families (people older than 55 and older can contribute an additional $1,000).
This matters because IRA and HSA contributions can be deductible for certain taxpayers, making them a last-minute life hack of sorts.
“If you're filling out your tax return, and you end up being in a higher bracket than anticipated or your [adjusted gross income] is causing you to miss out on some tax benefits, potentially contributing to an HSA is a great way to reduce your tax liability by a few thousand dollars,” says Isaac Bradley, director of financial planning at Homrich Berg, an Atlanta-based wealth management firm.
The Inflation Reduction Act of 2022 changed the rules around electric vehicle credits. Now, buying a new qualifying EV can unlock a nonrefundable tax credit of up to $7,500 if I make under $150,000 ($300,000 if I’m married filing jointly). I don’t even have to wait ‘til tax season: The credit can be applied upfront at the dealership, essentially giving me a major discount.
Pickering says there’s also a lot of opportunity for home improvement projects that fall under the residential clean energy credit, which kicks back 30% of certain environmentally friendly expenses up to $3,200. These include solar panels, solar heaters, wind turbines, fuel cells and more, so the guidance here is that homeowners should plan out upgrades in advance.
For instance, “you may want to plan to replace two windows this year and two windows the next year so that you can fully take advantage of the credit as opposed to doing all of it all at once,” she adds.
The House just passed a new version of the expanded child tax credit, and the proposal is headed to the Senate. If the bill, called the Tax Relief for American Families and Workers Act of 2024, becomes law, it would make the credit accessible to more families by increasing the amount that is refundable and adjusting it regularly for inflation.
What we don’t know is when this might happen. Proponents have said they want the new expanded child tax credit in effect for the 2024 filing season, which *checks notes* has already begun. And though the National Taxpayer Advocate seems worried about the agency’s ability to quickly handle adding the CTC to a bunch of already filed tax returns, the IRS swears everything is under control.
“Taxpayers should file when they’re ready to file,” Werfel told reporters recently. “If there is a change to the law that means, for example, they would get an additional or an increased credit, we will handle that at the IRS.”
Pickering agreed, pointing out that the government handles tax returns in the order they got them, and by waiting you’re just “putting yourself that much farther behind in the queue.”
So get moving — and, as always, remember the fastest way to get your tax refund is to file digitally and choose direct deposit as your delivery method.
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