You Earned More This Year? The Tax Strategy You Likely Overlooked
Key steps for tax planning with income growth.
1The Tax Impact of Income Growth
If your annual income increased significantly, your tax bill might be higher than anticipated. Factors like raises, bonuses, or freelance earnings can shift your tax bracket. Managing income growth without tax planning may lead to unpleasant surprises come April.
2Tax-Advantaged Accounts
Contributions to retirement accounts like 401(k)s or IRAs are among the most effective ways to reduce taxable income. For 2023, the 401(k) contribution limit is $22,500 ($30,000 if over 50). These investments secure your future while lowering immediate tax liability.
3Health Savings Accounts (HSA)
With a high-deductible health plan, HSA contributions are tax-deductible. 2023 limits are $3,850 (individual) and $7,750 (family). HSA funds grow tax-free and can be withdrawn tax-free for qualified medical expenses, making them ideal for long-term healthcare costs.
4Offsetting Investment Losses
Selling underperforming assets in your portfolio can offset capital gains through 'tax-loss harvesting.' This strategy zeros out net investment income to reduce taxes. Avoid violating wash-sale rules by repurchasing the same security within 30 days.
5Charitable Deductions
Donations to qualified charities are tax-deductible. High earners may benefit from 'bunching'—consolidating multiple years’ donations into one year to exceed the standard deduction. Keep receipts and verify 501(c)(3) status for eligibility.
6When to Consult a Professional
For income jumps over 25%, a tax professional can identify savings overlooked by DIY software. CPAs optimize strategies around state taxes, credits, and long-term planning, potentially saving thousands through tailored advice.
Original article: Money Under 30 — Bu Yıl Daha Fazla Kazandıysanız Kaçırdığınız Vergi Hamlesi