Because You Asked: Are There Any Tips to Save On My Taxes?

Since tax season is ramping up, and we are preparing tax returns for many of our financial services clients, we thought we would share three ideas to potentially help you save a bit on your taxes, both short and long-term.

  1. Contribute to your Health Savings Account (HSA): You actually have until your tax filing deadline to complete your contributions to your HSA for the previous year. The max contribution for an individual HSA in 2021 is $3600 and $7200 for a family plan.  If you are 55+, you can increase your contributions by $1000.

These contributions are a direct deduction on your tax return: your income is reduced by the amount of your contribution.

a. Remember that you must participate in a “High-deductible, HSA-compliant” health plan in order to contribute to a Health Savings Account.

b. The contribution amounts increase slightly for 2022 to $3650/$7300.

c.  If you want more info regarding an HSA, you can check out this blog post: Because You Asked: What is a Health Savings Account (HSA) and How Can it Benefit Me?

  1. Contribute to your personal IRA or Roth IRA: If you participate in an employer-provided retirement plan, you may not also contribute to an IRA/Roth IRA.  However, if your spouse does not participate in such a plan, you can contribute to an IRA/Roth IRA on their behalf, with some limitations based on your income.

 a.  If you have children or relatives who are working, but are not really able to contribute to their own plan, you may contribute for them as well, as long as they have at least enough income to cover the amount of your contribution: If they make at least $5000 in a year, you can contribute up to $5000 to a Roth IRA for them.

** Personal Note: for the young adults that I support in this manner, I include a requirement that they also contribute a minimal amount, typically $25 per month, automatically drafted from their checking to the Roth IRA.  My thinking is that they are then personally invested in the outcome, and see their contributions growing.

c.  Contribution Limits: $6000 per person per year, $7000 per year if over age 50.

d.  For a broader discussion about a Roth vs. IRA, you can go here: Because You Asked: How Is a Roth IRA Different from an IRA?

 3.  If you happen to have purchased a Long-Term Care Insurance Policy, at least a portion of your premiums may be tax-deductible. So be sure to inform your tax preparer of any policies you may have, to see if you are eligible for this deduction.  As you age, the deductible amount of your premium increases.

This gives you three actionable ideas to help you save on your taxes now, and if consistently applied, create an even greater benefit in the future.