For many, tax season has ended and its finally time to relax and forget about taxes until next year, right? Not quite. Contrary to popular belief, the period between January 1st through April 10th is the worst time to begin thinking about ways to reduce your tax liability because, by then, it may be too late to take advantage of some tax reduction strategies. This year, as you navigate through 2023, let’s think ahead and make note of several important tax deductions.
You may be able to deduct contributions to a Traditional 401k and/or IRA depending on how much you make and whether you or your spouse contribute to an employer-sponsored retirement plan.
If you itemize your deductions, you may be able to write off the monetary value of your cash or non-cash gifts from your taxable income. For those who donate their time, you may be able to deduct your transportation expenses, including miles driven, parking fares, and tolls paid.
If you spend a considerable amount of money paying for medical expenses, including miles driven for medical reasons, and these expenses exceed 7.5% of your taxable income, you may qualify for a medical expense deduction.
Health Savings Account (HSA):
Contributions to an HSA are tax deductible, and withdrawals are tax-free, if your HSA funds are used to purchase qualified medical expenses.
If you’re self-employed and meet certain criteria for maintaining and using a home office, you may be eligible to claim a home office deduction and write off certain expenses associated with rent, utilities, real estate taxes, repairs, maintenance, and other related expenses.
Student Loan Interest:
If you make interest payments on a qualified student loan, you may be able to deduct up to $2,500 of interest paid.
If you’re a qualified homeowner, you may be able to lower your taxable income by the amount of interest paid on your mortgage. The amount of mortgage interest you can claim will depend on whether your mortgage originated before or after December 16, 2017.
If the adage is true and time really does fly by, the 2023 tax season will be here before you know it. The sooner you can begin educating yourself by visiting https://www.irs.gov/ and discussing strategies to help lower your tax bill with your financial and tax professionals, the better off you’ll be when January 1st rolls around once again. Your future self will thank you.
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Data Source: turbotax.intuit.com and nerdwallet.com. Photo courtesy of Adobe Stock.
LS Investment Advisors, LLC (dba LSIA) is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.