04 Apr 4 ways to save on your taxes and save for retirement
Taxes are a necessary part of life, but that doesn’t mean you have to pay more than you should. With the right strategies, you can legally reduce your tax burden and keep more of your hard-earned money. Whether you’re a business owner, employee, or investor, here are four effective ways to save on taxes this year.
These positive money habits can work overtime to reduce your tax bill and help build long-term retirement savings.
Maximize Your Retirement Contributions
One of the best ways to lower your taxable income is by contributing to tax-advantaged retirement accounts. Contributions to traditional 401(k)s, IRAs, or SEP IRAs (for self-employed individuals) are typically tax-deductible, reducing your overall taxable income. If your employer offers a 401(k) match, contribute at least enough to get the full match—otherwise, you’re leaving free money on the table. Not only do these contributions save you money now, but they also help you build long-term financial security.
Open up or contribute to an individual retirement account (IRA).
How this helps save on taxes: If you meet eligibility requirements, contributions to a traditional IRA are made on a pre-tax basis and may lower your taxable income. (Roth IRAs are created with post-tax income, so withdrawals on the gross contributions are currently considered income tax free at distribution.) In 2024, you can contribute up to $7,000 to an IRA, or $8,000 if you are age 50 or older.1
Use a Health Savings Account (HSA) or Flexible Spending Account (FSA)
Medical expenses can add up, but tax-advantaged health accounts can ease the burden. HSAs offer triple tax advantages: contributions are pre-tax, the money grows tax-free, and withdrawals for qualified medical expenses are also tax-free. If you have a high-deductible health plan (HDHP), consider maxing out your HSA contributions. Similarly, FSAs allow you to set aside pre-tax dollars for medical expenses, reducing your taxable income.
Take Advantage of Tax Credits
Tax credits are even better than deductions because they directly reduce the amount of tax you owe, dollar for dollar. Some of the most valuable tax credits include:
- Earned Income Tax Credit (EITC) – Designed for low-to-moderate-income earners, this credit can significantly reduce your tax bill.
- Child Tax Credit – If you have dependents, this credit can provide a substantial tax break.
- Education Credits – The American Opportunity Credit and Lifetime Learning Credit help offset education costs if you or a dependent are in school.
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What’s next?
Tax planning isn’t just for the wealthy—it’s for everyone who wants to be smart about their finances. By making small changes now, you can reduce your tax bill and put yourself in a stronger financial position. Need personalized tax-saving strategies? Talk with us to make the most of these opportunities and keep more money in your pocket.
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This document is intended to be educational in nature and is not intended to be taken as a recommendation.
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