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Hey there, it's Donald Butler, and I've got some seriously cool tricks to help you save big on taxes. Imagine this as a roadmap to navigate the tax maze and end up with more money in your pocket. We're talking about smart money moves that will turn your financial game into a winning one. From maximizing your IRA contributions to making losses work for you, we're about to demystify the world of taxes and make it work in your favor. Let's discuss the 5 ways to reduce your taxable income.
1. IRA Contributions
Here's a neat trick: you can trim down your taxable income by contributing to a traditional IRA. If you make the contribution before April 15, you're golden. For 2023, you can contribute up to $6,500 or $7,500 if you're 50 or older. Now, if you're married, your spouse can jump on this tax-saving train too. That could potentially mean a deduction of up to $13,000 or $15,000 if both of you are rocking that 50+ status.
Now, a quick heads up – if you or your spouse have a retirement plan through work, there might be some rules to dance around. But if you don't have a plan or you're within the income sweet spot, this is a top-notch way to slash your taxable income. Just make sure your IRA administrator knows you're contributing for 2023 when tax-filing time rolls around.
Pro tip: If you're not already making automatic contributions to a retirement plan, start today. A little bit every month can add up big time.
2. Non-Cash Charitable Contributions
Donating clothing, household items, or other goodies to charities can score you a sweet tax deduction. Don't let those bags of old clothes in your closet go unnoticed! If your donations exceed $250, make sure you get a nod from the charity to cover your bases. At Butler Squared Consulting we can help you track and value your generosity. Some folks give away items worth a small fortune – make sure you're cashing in on those deductions.
3. Real Estate Taxes on Non-Primary Residence Property
You know you can deduct real estate taxes on your main crib, and probably your vacation spot too. But did you know you can also deduct real estate taxes on any property you own? Yup, no limit, as long as it adds up to a combined $10,000 deduction. Even that plot of land you're holding onto for future dreams can be part of the deduction party.
4. Turn Losing Investments into Tax Wins
Did you sell off some investment losers last year? If your losses outweighed your gains, don't sweat it – you can still deduct up to $3,000 of those losses against ordinary income. And the best part? You can carry the rest forward, potentially saving you more in the years to come.
5. Health Savings Account (HSA)
Think of this as an IRA for your health. Contribute up to $3,850 for personal coverage or $7,750 for family coverage to a Health Savings Account (HSA) and watch your taxable income for 2023 shrink. Hit the golden age of 55 or older? Toss in an extra $1,000 as a catch-up contribution.
This beauty comes with a catch – you need a high deductible health insurance plan to play. But it's a stellar way to snag medical expense deductions, especially if you don't itemize or your medical expenses don't hit that 7.5% of your adjusted gross income threshold.
So, there you have it – a handful of moves you can make today that'll have you doing the happy dance next tax season. It's like planting seeds of financial goodness that'll bloom into a beautiful refund garden. Happy tax savings!