Haven’t filed your taxes yet? You still have time to take advantage of these tax deductions
Americans must submit their 2024 tax returns by 15 April which is also the deadline to make some tax-deductible investments for the future. Here’s a look.
Tax Day 2025 is approaching, the deadline for Americans to submit their 2024 tax returns to the Internal Revenue Service. While most of the financial transactions that you’ll report to the tax agency that may give you a tax break will have to have occurred between 1 January and 31 December last year, there are a couple of deductions you can claim for investments in your future that you can still make this year.
These include contributions to your individual retirement arrangements (IRAs) and Health Savings Accounts (HSAs). However, you will have to make those contributions by 15 April 2025 and make sure that they go toward your contributions in the 2024 fiscal year. Here’s look at how you can reduce your 2024 tax bill.
Lower your 2024 tax bill with IRA deductions
Total contributions to traditional IRAs and Roth IRAs are limited to $7,000 in 2024 for those under 50. Meanwhile, if you turned 50 last year or are older, you can put in up to an additional $1,000 through a catch-up contribution.
However, only contributions to traditional IRAs are tax deductible depending on your income. The amount that you can deduct also depends on whether you or your spouse has a retirement plan at work. You can check the IRS website for the full charts detailing the income range in which your deduction may be allowed.
Read also: Saver’s Credit: the $2,000 tax credit for putting money in your retirement plan
Lower your 2024 tax bill with HSA deductions
HSA contributions go into a tax-exempt trust or custodial account with a qualified HSA trustee. For 2024, individuals with self-only coverage can contribute up to $4,150 to their account, while the limit is $8,300 for family coverage. Those 55 and older can make an additional contribution amount of $1,000.
These funds can then be used for qualified medical expenses like copays, coinsurance, deductibles and prescriptions and the withdrawals to make those payments are tax-free. Additionally, once you turn 65 withdrawals no longer need to be solely for medical needs.
Karen Volo, Head of Health and Benefit Accounts, highlights how Health Savings Accounts (HSAs) can help Americans better manage their current and future health expenses. pic.twitter.com/GpySCapqDN
— Fidelity Public Policy (@FidelityPolicy) August 27, 2024
A factsheet on the utility of HSAs for seniors provided by Wellsely University highlights that “Using HSA money is an especially good method to pay for Medicare as it is challenging to pay for Medicare with pre-tax dollars.” Since Medicare premiums are automatically deducted for Social Security checks, an HSA can be a helpful way to “reimburse yourself directly.”
Be sure to document your contributions
Make sure that you indicate that the contribution you are making to your IRA or HSA is for the 2024 tax year. You can do this in the memo box on a check or reason for the electronic transfer.
While you have until 15 April to make these contributions and still claim them to lower your tax bill from last year, it’s better to process these transactions sooner rather than later. This will give yourself a margin of error if there are any problems that may arise. Check to make sure that the transaction was processed correctly and that the amount in your account for last year is the same amount you are claiming on your tax return.
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