Ways to Gift Yourself Tax Savings This Holiday Season

Lawndale News Chicago's Bilingual Newspaper - Business

The hustle and bustle of the holiday season is upon us, and while you’re likely busy hunting for the perfect gifts for your loved ones, don’t forget that you can gift yourself something too—a tax break. With the end of the year quickly approaching, now’s the time to make important year-end money moves that could gift you a smaller tax bill, bigger tax refund, or a better overall financial position in the year ahead. Here are five tax-savvy money moves to make now.

Get Your Gifts Ready: If you’re feeling generous with your wealth and would like to pass some of it on to a loved one or other beneficiary, you can gift up to $17,000 (or $34,000 for married couples filing a joint tax return) without triggering a gift tax or reducing your lifetime gift and estate tax exemption. If you wish to make charitable gifts in sums that warrant itemizing your deductions, cash donations to qualified charities can generally be deducted from taxable income (up to 60% of adjusted gross income [AGI]).

Revisit Your Retirement Savings: Now is an ideal time to see if you’re on track for maximizing your retirement savings for the year. Contributions to tax-deferred retirement accounts—like your employer’s 401(k) or 403(b)—reduce your taxable income, thus lowering your tax bill. The contribution limit in 2023 is $22,500, or $30,000 if you’re age 50 or older. If you contribute to an IRA outside of an employer-sponsored account, the contribution limit to an individual traditional IRA is $6,500, and an additional $1,000 catch-up contribution is allowed if you’re age 50 or over.

Give Your Health Savings Account (HSA) a Check-Up: If eligible, a tax-smart way of setting aside money for qualified medical expenses and lowering your taxable income is to contribute the maximum amount allowed (or the maximum you can manage) to an HSA. HSAs offer several advantages: You pay no federal taxes on your contributions, no federal taxes on investment earnings, and no taxes on withdrawals if the money is used for qualified medical expenses. For 2023, the contribution limit is $3,850 for individuals or $7,750 for families; an additional $1,000 catch-up contribution is allowed if you’re 55 or older.

For additional tips and information, visit www.icpas.org/findacpa.

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