As the tax season approaches, many individuals, particularly W-2 employees, are looking for effective strategies to minimize their tax burden for 2024. The window for tax-saving opportunities narrows significantly once the calendar year concludes, with experts noting that very few maneuvers remain post-December 31. However, with the impending April 15 deadline, there are still a few strategic options that can help these employees maximize their refunds or reduce their overall tax liabilities.
For individuals earning wages as W-2 employees, the flexibility in tax planning becomes limited as the year ends. According to financial professionals, the options for retroactively changing your tax situation diminish dramatically after the end of the fiscal year. As Catherine Valega, a certified financial planner and founder of Green Bee Advisory emphasizes, many common strategies—like adjusting contributions to your 401(k) or claimed charitable donations—are no longer available once the new year kicks in.
Those who have not yet secured their tax benefits will need to navigate some specific areas that may still offer relief as they approach the tax deadline.
One of the remaining options for W-2 employees is the Health Savings Account (HSA). For those who qualify with a high-deductible health plan, there is a significant advantage in contributing to an HSA. As of 2024, the contribution limits stand at $4,150 for individuals and $8,300 for family coverage. According to Thomas Scanlon, a CFP at Raymond James, the HSA can be an easy route to securing tax deductions before the filing deadline. By fully utilizing this account, eligible individuals can not only save on taxes but also prepare for future medical expenses.
Another effective strategy is to make the most of Individual Retirement Accounts (IRAs). Whether opting for a traditional IRA or a Roth IRA, individuals have until April 15 to make contributions that can yield tax benefits for the previous year. The contribution limit stands at $7,000 for most individuals, with an additional $1,000 catch-up contribution for those aged 50 and older. Engaging in this strategy can lower a taxpayer’s adjusted gross income, ultimately leading to potential tax deductions.
Andrew Herzog, a wealth manager, reminds us that while traditional IRAs delay tax payment until later withdrawals, they are an essential tool in tax planning and can alleviate some of the tax burdens, particularly in the current filing season.
Married couples may also consider leveraging spousal IRAs to maximize their tax-saving potential. For non-working spouses, establishing a separate Roth or traditional IRA allows the working partner to contribute up to the same limits as if they were contributing on behalf of the non-working spouse. This strategy can provide substantial tax advantages, given that these contributions might be tax-deductible, depending on the couple’s combined income and deductions.
While post-year-end tax planning options are limited for W-2 employees, there remain viable strategies to optimize tax savings. By exploring HSAs and IRA contributions—especially with the spousal IRA option—taxpayers can still make strategic financial decisions that positively impact their tax returns, increasing the likelihood of a favorable outcome come April. Awareness and timely action are critical to maximizing these opportunities and navigating the complexities of tax season successfully.
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