How You Can Still Reduce Your 2024 Taxes by Up to $17,300 Before the April Deadline

As tax season approaches, many people assume that their taxable income for 2024 is already set. However, that is not entirely true. There are still opportunities to make contributions that can reduce your tax liability before the April 15, 2025, deadline. By strategically investing in tax-deductible accounts, you could lower your taxable income significantly and save thousands of dollars.

According to Ryan Losi, a Certified Public Accountant and Executive Vice President at Piascik, taxpayers can still make contributions to Individual Retirement Accounts (IRAs) and Health Savings Accounts (HSAs) for the 2024 tax year. These contributions can potentially reduce taxable income by as much as $17,300, making them a powerful tool for last-minute tax savings.

IRA Contributions Can Lower Your Tax Bill

One of the most effective ways to reduce taxable income is by contributing to a traditional IRA. These contributions are tax-deductible, meaning they reduce the total income subject to taxation. However, to take advantage of this benefit, contributions must be made by April 15, 2025.

For the 2024 tax year, individuals under 50 can contribute up to $7,000, while those 50 or older are allowed to contribute up to $8,000. It is important to note that income limits may apply if you or your spouse participate in a workplace retirement plan. While these contributions provide tax savings now, withdrawals during retirement will be taxable, and early withdrawals before age 59½ may result in penalties.

The Tax Advantages of Health Savings Accounts

For individuals enrolled in a high-deductible health plan (HDHP), contributing to a Health Savings Account (HSA) is another excellent way to lower taxable income. HSAs are known for offering what financial experts call a triple tax advantage.

First, contributions to an HSA are tax-deductible, immediately reducing taxable income. Second, funds in the account grow tax-free, meaning any investment gains are not subject to taxes. Third, withdrawals used to cover qualified medical expenses are also tax-free. This combination makes HSAs a highly effective strategy for both tax savings and future medical expenses.

The contribution limits for HSAs in 2024 are as follows: Individuals with self-only coverage can contribute up to $4,150, while those with family coverage can contribute up to $8,300. Additionally, individuals 55 or older can contribute an extra $1,000, further increasing their tax-saving potential.

Maximizing Your Tax Savings Before the Deadline

By taking full advantage of both IRA and HSA contributions, taxpayers can significantly reduce their taxable income. For instance, a taxpayer who is 55 or older with family HSA coverage and who maxes out both accounts could claim an $8,000 deduction from an IRA contribution and a $9,300 deduction from an HSA contribution. That results in a total taxable income reduction of $17,300, which could lead to substantial tax savings depending on the individual’s tax bracket.

Even if you are unable to contribute the maximum allowed amount, making partial contributions can still result in meaningful tax advantages. Every dollar set aside in these accounts reduces your taxable income and can lower the overall tax burden.

Act Before the April 15 Deadline

With the tax filing deadline fast approaching, now is the time to assess your financial situation and determine how much you can contribute to an IRA or HSA. Consult with a financial professional or tax expert to ensure you meet eligibility requirements and maximize your savings potential.

These last-minute tax-saving strategies can help you keep more of your hard-earned money, but the opportunity disappears after April 15. Taking action now could make a significant difference when it comes time to file your taxes.