6 Ways to Reduce Your Taxable Income

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Famed baseball player Roger Maris once said, “You hit home runs not by chance but by preparation.” If you haven’t already filed your taxes and want to hit a home run on your tax return this year and in the future, remember these six tax tips.

Contribute to an IRA

You can still reduce your 2023 taxable income if you make a contribution to a traditional IRA no later than April 15. You can contribute and deduct up to $6,500 or $7,500 if you are age 50 or older. And if you are married, your spouse can also make a contribution. That would give you a fresh tax deduction of up to $13,000, or $15,000 if you’re both 50 or older.

If either of you are covered by a retirement plan through your employer, there may be limitations on your ability to take this deduction. But if you do not have a plan, or if you have one and you are within the income thresholds, this is one of the best ways to lower your taxable income.

Remember to let your IRA administrator know that your contribution made is for the 2023 year so you can deduct it when you file your 2023 taxes.

To get a jump on the taxes you file next year, if you haven’t set up automatic contributions to a retirement plan, do so today so you are making small contributions every month. If you have set one up, increase it by a little bit, and save even more throughout the year.

Non-cash Charitable Contributions

People often overlook donations of clothing, household items, and other goods donated to charitable organizations. Did you donate household items or clothing to a charity last year? You may be able to get a nice tax deduction on your taxes. If your donations are more than $250 make sure you have an acknowledgement from the charitable organization. You can value and track your donations using TurboTax ItsDeductible. Some people give away items totaling thousands of dollars in value. Take advantage of that tax deduction for any items you’ve given away.

Real Estate Taxes on Non-Primary Residence Property

Most people know that you can deduct real estate taxes on your primary residence. Many are also aware that you can deduct the taxes on a second home. Less well-known, however, is the fact that you can deduct real estate taxes on any property that you own, and there’s no limit on the number of properties limited up to a combined $10,000 deduction.

Let’s say that you own land that you’re holding for future speculation. Since it doesn’t generate any revenue, you can’t include it as a rental property. But you can deduct real estate taxes that you’re paying on the land.

Offset Losing Investments

Did you sell any investment losers before the end of last year? If your losses exceed your gains, you can still deduct up to $3,000 of the loss against ordinary income, and carry the balance forward to future years indefinitely.

Contribute to a Health Savings Account

This is like an IRA for medical expenses. You can contribute up to $3,850 to a personal Health Savings Plan (or up to $7,750 for family coverage) up to the tax deadline this year and reduce your taxable income for 2023. If you are age 55 and older you can contribute an additional $1,000 as a catch-up contribution.

This has to be done in conjunction with a high deductible health insurance plan. But it is also an excellent way to get the benefit of medical expense deductions if either you don’t itemize, or if you itemize and your medical expenses don’t exceed 7.5% of your adjusted gross income.

These are just some of the things you can start today, execute throughout the year, and see big dividends come next tax season.

With TurboTax you don’t need to know about any of these tax savings. TurboTax will ask you simple questions and give you the tax deductions and credits you are eligible for based on your answers. Meet with a TurboTax Full Service expert who can prepare, sign and file your taxes, so you can be 100% confident your taxes are done right. Start TurboTax Live Full Service today, in English or Spanish, and get your taxes done and off your mind.