Don’t overlook these 3 tax moves that could save you thousands, experts say

With the April 15 tax deadline less than two weeks away, you may be feeling the itch to get your return done and filed as quickly as possible. And these days, there are plenty of online filing services that can help you get it done with just a few clicks.

But take a breath. You still have plenty of time to make sure you’ve lowered your tax bill (or boosted your refund) as much as possible before you file. For some taxpayers, that might mean making a last-second contribution to tax-advantaged retirement accounts. It could also mean taking a few minutes to click around the deductions page on your tax software to make sure you’re not leaving money on the table.

For just about everyone, making sure i’s are dotted and t’s are crossed is worthwhile — and for some, it could mean saving thousands of dollars. Here are three tax moves that experts say people tend to overlook.

If you’re looking to take action now to save on your 2023 taxes, there aren’t many moves left to make between now and Tax Day.

One notable exception: You have until the tax deadline to make prior-year contributions to tax-advantaged retirement and savings plans, including traditional IRAs, SEP IRAs and health savings accounts.

Contributions to such accounts are made with pre-tax money that counts against your taxable income. If you didn’t hit your maximum contribution for 2023, you can retroactively direct funds to those accounts for the 2023 tax year. For those under age 50, the contribution limits are $22,500 for a 401(k), $6,500 for an IRA and $3,850 (for solo coverage) or $7,750 (for family coverage) for an HSA.

Doing so lets you kill two birds with one stone, says Mark Jaeger, vice president of tax operations at TaxAct. “You can spend some money to save money when it comes to your taxes,” he says. “You can contribute to your retirement and also get the added benefit of reducing your tax bill.”

Chances are, whichever tax software you use will ask a series of questions to see if you qualify for certain popular deductions.

If you have children or other dependents, for instance, your tax prep software will likely guide you to the Child Tax Credit and the Child and Dependent Care Credit. Students or parents of students will likely be guided toward the American Opportunity and Lifetime Learning credits.

“You can’t mess those up,” says Jaeger. “You’re not going to enter something in wrong and the program’s not going to give you the Child Tax Credit. Those are the ones you know you’re going to qualify for every year.”

But some credits, he says, you may have to hunt for.

“One of the less common ones I like to point out is the Saver’s Credit,” Jaeger says. “People think they’re already getting a tax break for contributing to their 401(k) plan at work. But you can get a double benefit if your [adjusted gross income] is below a certain threshold.”

For tax year 2023, individual filers with an AGI of $36,000 or less (or married joint filers with $73,000 or less) can claim the credit, which, depending on your income, is worth 10%, 20% or 50% of the value of your annual contribution.

For filers who itemize deductions, health-care costs are another common oversight, says Ed deHaan, an accounting professor at the Stanford Graduate School of Business.

You can deduct qualified medical expenses to the extent that they exceed 7.5% your taxable income, “and for many retirees, their costs are over that,” deHaan says. “Research shows there is widespread underuse of [the health-care deduction], especially among retired people who may need the money the most.”

If you’re not sure what you spent on health care in 2023, ask for statements from your care providers and pharmacies. “Fortunately, most of them can provide you a year-end statement,” de Haan says.

If you have a side hustle or small business, you likely know that there are plenty of tax deductions available, including the cost of supplies, square footage of a dedicated home office space and mileage accrued on your work vehicle.

But remember, you have to have the documentation to back all of those deductions up — a convention that many side hustlers may not think about, says deHaan.

“What I hear is that many people don’t keep adequate records on their personal businesses,” he says. “If you get audited, the IRS will certainly ask for substantiation of all material expenses you’ve taken against side income you have.”

Ideally, you have separate credit and bank accounts for your small business or side hustle and have a filing system for your invoices and receipts. But even a much simpler approach could help you keep your records straight and bail you out in the event of an audit.

“What I recommend for people is just to get in the habit of snapping a photo of a receipt, sticking it into a folder on your phone, and then at tax time you have it right there,” says deHaan. “If you’re ever audited, it might be a mess, but at least you have the records. And the nice thing about a photo is that the time and location is recorded.”

As a rule of thumb, the IRS recommends all taxpayers keep any relevant documents for three years from the date they filed — a move that’s made all the easier if you keep digital records, de Haan adds.

“Just to be conservative, digital storage space is cheap,” he says. “A digital shoebox full of receipts [is something] you can keep forever. A messy accounting system is better than no accounting system.”