Tax filing tips to ensure everyone is practicing financial literacy.
The Internal Revenue Service deadline to file 2023 income tax returns is April 15, 2024. The cutoff for the taxpayer requesting an extension is October 15, 2024. Keep in mind that filing an extension does not delay the amount owed.
Below are some 2023 tax filing tips and a few simple steps that can be taken to maximize a paycheck.
Steps To Maximize a Paycheck
Increase 401(k) contributions.
- The amount contributed is tax-deferred. However, tax liability occurs when the time for withdrawals comes.
Deduct health savings account (HSA) contributions.
- The maximum amount that can be contributed to an HSA is $3,850 for an individual and $7,750 for a family. People 55 and older benefit from an extra $1,000 catch-up contribution.
- One must be enrolled in a high-deductible health plan to be eligible for an HSA. Tax deduction can be claimed for HSA accounts on Schedule A (Form 1040).
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Deduct medical expenses.
- If out-of-pocket costs for the year exceed 7.5% of adjusted gross income (AGI), costs can be written off the excess on a tax return. When calculating expenses, include travel costs to and from appointments, prescriptions, and co-pays.
Receive free tax return preparation.
- Depending on income, disability status, or age, the IRS’s Volunteer Income Tax Assistance program may be able to help for free.
- During tax season, many people get excited about the amount of the refund (i.e., interest-free loan to the government). People get excited because the refund is considered a form of forced savings throughout the year.
To ensure the money is used in the most efficient way possible, consider one of the following.
Start an emergency fund.
- Unexpected expenses will occur at some point. Having cash is better than financing the costs with a credit card. A tax refund could be the cash infusion needed to prepare for tomorrow’s emergency.
Related Article: 5 simple steps to eliminate debt and create financial success.
Increase savings.
If an emergency fund makes one feel secure, save a refund for a future expense. Future expenses can include a vacation home or home repair.
Pay off debt.
- Assuming an emergency fund balance is sufficient, an option is available to use the refund on debt reduction. Decreasing debt load is like getting a pay increase while also increasing wealth.
- Because tax season occurs each year, use this time as an opportunity to hit the financial reset button. Better planning, preparation, and execution to enhance financial fitness is imperative.
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About the author, Al Riddick
Al is the founder and president of Game Time Budgeting. The award-winning financial fitness company helps people develop the proper mindset, behaviors, and systems for saving more and reducing debt. For almost two decades,
Al and his wife, Lesia, have lived debt-free after eliminating $150,000 in financial obligations.
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