With your 2020 tax return filed, now is a good time to turn your attention to 2021 taxes and take action to keep more money in your pocket. Here are 4 strategies to consider.
This year, were you surprised with a huge tax bill or alternatively, a huge refund? If the answer is yes, you might want to adjust your W-4 withholding.
You can set aside as much as $19,500 of your earnings ($26,000 if you are 50 or older) to an employer-sponsored retirement plan. The money in the plan will grow tax-free, and the contributions may reduce your tax bill. Traditional IRA contributions also reduce your taxable income. The current contribution limit is $6,000 ($7,000 if you are 50 or older).
Contributions to an HSA are tax deductible and withdrawals for qualified healthcare expenses are tax-free. In 2021, you may be eligible to contribute up to $3,600 for individual coverage or $7,200 for family coverage. If you’re 55 or older, you can contribute an extra $1,000. Money you don’t need to withdraw can be left until age 65, making an HSA a tax-advantaged retirement savings account.
With FSA accounts, the government allows you to divert your earnings pre-tax and use them to pay for healthcare or dependent care expenses. The difference is that you have to use the money by the end of the year or lose it.
A 529 plan is one of the most popular options to set aside after-tax money to pay for qualified college and K – 12 expenses. The real advantage is that you avoid paying taxes on any earnings or interest in the plan.
Avoid unexpected tax bills with these money moves. For more ideas and advice on reducing taxes, talk to your Alloy Silverstein accountant or financial advisor.
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