8 Tax-Saving Tips You Must Use Before the Filing Deadline – Keep More Money in Your Pocket!

Taxes can be confusing, but there are ways to save money if you know what to do. As the tax filing deadline approaches, it is important to make smart decisions to lower your tax bill. Below are some easy ways to reduce the amount you owe and keep more money in your pocket.

1. Contribute to Retirement Accounts

One of the best ways to save on taxes is by putting money into a retirement account. A retirement account is a special place where you can save money for when you stop working. Some common types include:

• 401(k) Plans – Many jobs offer these plans. If your company gives you a "match," this means they add extra money when you contribute. This is free money!

• Traditional IRA (Individual Retirement Account) – If you put money into this account, you may be able to deduct that amount from your taxable income.

• Roth IRA – You won’t get a tax break now, but you won’t have to pay taxes on the money when you take it out later.

To get tax benefits, you must contribute to these accounts by December 31 or, in some cases, by the tax filing deadline. The more you contribute, the lower your taxable income.

2. Tax-Loss Harvesting: Turn Investment Losses into Savings

If you have investments, like stocks, that have lost value, you can use them to lower your tax bill. This is called tax-loss harvesting. It works like this:

• If you sold stocks or other investments and made money, the IRS expects you to pay taxes on those gains.

• However, if you also sold investments that lost money, you can use those losses to reduce your taxable gains.

• If your losses are greater than your gains, you can deduct up to $3,000 per year from your other income.

This strategy is helpful for people who invest in the stock market. It allows them to turn losses into tax savings.

3. Take Advantage of Clean Energy Credits

If you made energy-efficient improvements to your home, you could qualify for clean energy tax credits. The government encourages people to use cleaner energy by offering tax breaks for things like:

• Installing solar panels on your roof

• Adding energy-efficient windows or doors

• Upgrading to a high-efficiency heating and cooling system

• Buying an electric vehicle (EV)

These tax credits can reduce the amount of tax you owe, sometimes by thousands of dollars. If you're planning any upgrades, check if they qualify for a tax credit before the year ends.

4. Make Charitable Donations

Donating to charity is a great way to give back and lower your tax bill at the same time. Here’s how it works:

• You can deduct donations made to eligible charities.

• Donations can be in the form of money, clothing, food, or even a used car.

• You must keep a receipt or proof of your donation to claim it on your taxes.

Some people donate stocks instead of cash. If you donate stock that has increased in value, you may avoid paying taxes on the profit and still get a deduction!

5. Check for Tax Deductions and Credits

A tax deduction lowers the amount of money the IRS considers taxable income, while a tax credit directly reduces the amount of tax you owe. Here are some common ones:

Deductions:

• Student Loan Interest Deduction – If you’re paying off student loans, you may be able to deduct up to $2,500 of interest paid.

• Home Office Deduction – If you work from home, you might be able to deduct some expenses like internet and utilities.

• Medical Expenses – If your medical expenses were very high, you may be able to deduct a portion of them.

Credits:

• Child Tax Credit – If you have children, you may be eligible for up to $2,000 per child in tax credits.

• Earned Income Tax Credit (EITC) – This helps lower-income workers get extra money back.

• American Opportunity Credit – If you are paying for college, this credit helps cover education costs.

Checking for these deductions and credits before filing can help you save hundreds or even thousands of dollars.

6. Make Sure to Take Required Minimum Distributions (RMDs)

If you have a retirement account and are 73 years or older, the IRS requires you to withdraw a certain amount each year. These are called Required Minimum Distributions (RMDs).

If you don’t take your RMDs on time, you could face a 50% penalty on the amount you were supposed to withdraw. That means if your RMD was $10,000, you could lose $5,000 just in penalties!

To avoid this, make sure to take your RMD before December 31 each year.

7. Maximize Your Health Savings Account (HSA)

If you have a Health Savings Account (HSA), you can put money into it tax-free. This account helps pay for medical expenses, like doctor visits, prescriptions, and hospital bills. Contributions to an HSA reduce your taxable income, which means you pay less in taxes.

For 2024, the contribution limits are:

• $4,150 for individuals

• $8,300 for families

If you haven't contributed the full amount yet, consider adding more before the deadline to boost your tax savings.

8. Defer Income to the Next Year

If you expect to make a lot of money this year, you may be able to delay receiving income until next year to lower your taxable income. Here’s how:

• If you're self-employed, consider waiting until January to send invoices.

• If your employer offers a year-end bonus, see if it can be postponed to the new year.

By shifting income to the next year, you might be able to stay in a lower tax bracket and pay less in taxes.