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Maximize Your Year-End Tax Savings with O1ne Mortgage

As the year draws to a close, it’s the perfect time to consider strategies to maximize your tax deductions, claim credits, and boost your retirement savings. Here are ten tax moves to think about before the new year.

1. Contribute to Retirement Accounts

For the 2023 tax year, contribution limits have increased. Ensure you’ve maximized contributions to your 401(k) and IRA accounts. You can contribute up to $6,500 to your IRA, with an additional $1,000 if you’re over 50. For 401(k) plans, the limit is $22,500, plus a $7,500 catch-up contribution for those 50 and older.

2. Consider Your Roth Options

Roth IRAs and Roth 401(k) plans are funded with after-tax dollars, offering tax-free withdrawals in retirement. Check income limits for Roth IRAs and consider a Roth conversion if you prefer tax-free distributions over taxable withdrawals.

3. Take Required Minimum Distributions to Avoid Penalties

Starting at age 72 (or 73 if you turn 72 in 2023 or later), you must take required minimum distributions (RMDs) from tax-deferred retirement accounts. Failure to do so can result in a 50% excise tax on the amount you were supposed to withdraw.

4. Offset Your Capital Gains

Use capital losses to offset any capital gains you’ve made during the year. You can offset all your capital gains and use up to $3,000 of remaining losses to reduce your regular income. Leftover losses can be carried forward to future years.

5. Review Itemized Deductions

If your itemized deductions exceed the standard deduction, consider deductions such as mortgage interest, state and local taxes, property taxes, sales tax, gambling losses, moving expenses, and losses from federally declared disasters.

6. Check Health-Related Deductions

Maximize contributions to Health Savings Accounts (HSAs) and spend any remaining Flexible Spending Account (FSA) funds. You may also be eligible to deduct medical expenses that exceed 7.5% of your adjusted gross income if you itemize your deductions.

7. Make a Charitable Donation

If you itemize, you can deduct charitable contributions of money or property, up to 60% of your adjusted gross income. Ensure your contributions meet IRS requirements for tax deductions.

8. Take Advantage of Increased 529 Limits

While contributions to 529 educational plans aren’t tax-deductible, the funds grow tax-free and can be withdrawn tax-free for qualifying educational expenses. The gift limit for 2023 is $17,000 per individual.

9. Defer Income

If you expect a large year-end bonus or other taxable income, consider deferring it to the next year to minimize this year’s tax liability. This strategy can give you additional time to plan for the taxes you’ll owe.

10. Look for Eligible Tax Credits

Even though many pandemic-era tax credits have expired, you may still qualify for credits such as the Earned Income Tax Credit, Child Tax Credit, Child and Dependent Care Credit, Saver’s Credit, and Residential Clean Energy Credit.

The Bottom Line

Though your 2023 taxes aren’t due until April 2024, taking these steps before the year ends can set you up for a smoother tax season. Start organizing your paperwork now to ensure you’re ready to file your return.

For any mortgage-related needs, call O1ne Mortgage at 213-732-3074. We’re here to help you navigate your financial journey with confidence.

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