As the tax season progresses, many W-2 employees find themselves searching for last-minute strategies to minimize their tax liabilities or maximize their refunds for the year. Unfortunately, the opportunities for significant tax adjustments diminish substantially after December 31, leaving taxpayers with limited options to explore. It’s crucial, however, to familiarize yourself with the strategies that remain available well ahead of the impending April 15 deadline.
Once the final day of the calendar year passes, traditional tax-saving methods like maximizing 401(k) contributions or implementing tax-loss harvesting can no longer be utilized. Experts in the financial planning field, such as certified financial planners, emphasize that after December 31, there are only a few viable last-minute strategies. Therefore, it’s essential for W-2 employees to consider their available options early in the year rather than scrambling at the last moment.
One of the most beneficial options that W-2 employees can leverage is the Health Savings Account (HSA). If you haven’t yet contributed the maximum allowable amount for the 2024 tax year, you still have the ability to do so until April 15. For individuals covered by high-deductible health plans, the contribution limits for HSAs are significant—$4,150 for individual coverage and $8,300 for families. Taking advantage of the HSA can yield substantial tax benefits, and financial consultants consistently recommend it as an easy and effective strategy for eligible individuals.
The deadline for contributions to Individual Retirement Accounts (IRAs) also coincides with the April 15 tax deadline. For the year 2024, individual taxpayers can contribute up to $7,000 to their traditional IRAs, with an additional $1,000 allowance for individuals aged 50 and over. Deductions for these contributions can lower your taxable income, a strategy especially useful for those aiming to reduce their adjusted gross income.
Moreover, there is a lesser-known but critical tax strategy for married couples: the spousal IRA. This allows a working spouse to contribute to a separate IRA for a non-working spouse, effectively enabling couples to maximize their tax-deferral opportunities. This is a valuable avenue for joint filers looking to optimize both spouses’ retirement savings, assuming the working spouse has sufficient income.
With the April 15 deadline looming, it is imperative for W-2 employees to be proactive in identifying and executing any final tax-saving measures. While many common strategies have restrictions once the year ends, opportunities like HSAs and IRAs remain open and can significantly impact overall tax outcomes. For those seeking to alleviate some of the tax burdens, tapping into these avenues is both prudent and necessary. As tax experts suggest, waiting until the last moment is not advisable; the time to act is now.