Get ready for tax year 2023 now (TV-PG; 4:21)
Tax tips for 2023: How to save money on your tax return
It’s never too early to start thinking about your taxes, especially if you want to save money. In a recent interview, CPA and TurboTax expert Lisa Greene-Lewis offered these tips:
Invest in tax-deferred accounts. This includes your 401(k) and IRA. By investing in these accounts, you’re lowering your taxable income. And if your employer matches your 401(k) contributions, you’re getting free money!
Take advantage of the saver’s credit. This is a little-known credit that can give you up to $2,000 (if you’re married filing jointly) or $1,000 (if you’re single) just for investing in your retirement.
Use your health savings account. An HSA is a great way to save money for medical expenses, and it’s also a tax-advantaged account. You can contribute up to $3,850 to an HSA for a single plan or $7,750 for a family plan.
Harvest capital losses. If you’re an active trader, you can offset your capital gains with capital losses. This can help you lower your tax bill.
Plan ahead with TurboTax Taxcaster. This tool allows you to put in different scenarios and see how they will affect your tax refund or tax bill. This is a great way to plan for the end of the year and make sure you’re not overpaying or underpaying your taxes.
Here are a few additional tips that may help you save money on your taxes in 2023:
Itemize your deductions. If you have a lot of deductible expenses, such as medical expenses, charitable contributions, and state and local taxes, it may make sense to itemize your deductions on your tax return.Claim all of your tax credits. There are many tax credits available, such as the child tax credit, the earned income tax credit, and the education tax credits. Make sure you claim all of the tax credits that you’re eligible for.File your taxes electronically. E-filing is the fastest and most accurate way to file your taxes. It can also help you avoid errors that could lead to delays or penalties.
If you have any questions about your taxes, be sure to consult with a qualified tax professional.
Read the full Q&A below or watch the video above.
Tracy Byrnes: So April 2024 might seem like a lifetime away, but there are things you can do now to help save you money on that tax return. Lisa Greene-Lewis, TurboTax expert and CPA, is with us right now. Look, no one wants to think about this stuff, but it’s helpful to get ahead, isn’t it?
Lisa Greene-Lewis: It’s very helpful. Things you do all year long relate to your taxes. So definitely I would recommend investing in tax-deferred accounts. So that’s like your 401(k), because by investing in it, you’re lowering your taxable income. And then it’s a win, especially if you work for an employer who matches, you’re increasing your nest egg and building your retirement and also lowering your taxes.
Tracy Byrnes: And actually, I think that’s such an important point right there because so many people sign up when they first get a job and put a percentage in their 401(k) and then forget about it. Odds are very good you probably could increase it. You can try to hit the max and try to take the maximum, and like you said, it gets your tax bill down. It increases your nest egg in retirement. Also, increasing your nest egg could be that saver’s credit.
Lisa Greene-Lewis: Right. This is a little-known credit. So the IRS, they state that one out of five people miss this credit, and it’s up to $2,000 for married filing jointly and $1,000 if you’re single. And it’s just a credit you automatically get just for investing in your retirement.
Tracy Byrnes: Which is amazing. Which as a reminder, it’s $22,500, $30,000 if you’re 50 and older in your 401(k). And then your IRA, you could still put money in an IRA as well, can’t you?
Lisa Greene-Lewis: Right. So your IRA, you can invest up to $6,500, and it’s $7,500 if you’re a married filing — I mean, 50 and over. And that is for tax year 2023. And one thing to keep in mind that you can invest in your IRA up to the tax deadline and make an impact on your taxes and lower your taxes.
So that’s one thing to keep in mind. That is one of the only tax benefits you could get after December for the tax year that you’re filing.
Tracy Byrnes: Right. Because your 401(k) ends at 12/31. But that’s super important. Also too, I think people should remember to use their health savings accounts. You can use that as a savings vehicle as well and sock some money away. All these things are really good to look at this time of year because it gives you the back half to make some changes.
Lisa Greene-Lewis: Exactly. Yeah, your health savings account you can invest up to $3,850 for a single plan, and a family plan is $7,750.
Tracy Byrnes: So start looking at that. And I suppose also before I let you go, the last thing you can start looking at, too, are your gains and losses if you are an active trader of sorts. Maybe you have a lot of gains. Maybe you start looking to harvest losses. People start to do that once the fall comes around, for sure.
Lisa Greene-Lewis: Right. That’s another great tip to do by the end of the year. Look at some of your losing stock. And if you sell them, you’ll be able to offset against your capital gains, and then also you’ll be able to offset up to $3,000 against ordinary income, like, your wages.
So that is really helpful. And also TurboTax–we have TurboTax Taxcaster, which helps you plan before the end of the year. You can put scenarios in, put your different situations in and see how you can maximize your refund or lower the taxes you owe.
Tracy Byrnes: Yeah, that’s actually a great tip especially if you’re coming up on a year-end bonus or something, you can manage your tax bill. Lisa Greene-Lewis, TurboTax expert and CPA, thank you so much for your insight.
Lisa Greene-Lewis: Thank you for having me.
Editor’s Note: The content was reviewed for tax accuracy by a TurboTax CPA expert for the 2022 tax year.