Saving Thousands: Last Minute Tips to Reduce Your Tax Bill

The tax filing deadline for this season is just around the corner, but there is still time to reduce what you owe with last minute moves.  

For the majority of filers, taxes for 2024 returns are due on April 15. 

It is still possible to reduce your tax bill or increase the IRS rebate by investing in your retirement savings account before the deadline.

For those with a traditional individual retirement account (IRA), contributions can be made for the previous year right up until Tax Day.

Traditional retirement accounts operate on a tax-deferred basis, allowing funds to grow tax-free while you are working and are only taxed when withdrawn during retirement.

Contributions to Roth accounts, on the other hand, are funds that have already been taxed. 

Putting money into a traditional account can therefore lower your taxable income, and could even potentially push you into a lower tax bracket if you contribute enough. 

This tax season, the maximum amount Americans can contribute to a traditional IRA is $7,000 – or $8,000 for anyone over 50. 

There is still time to lower your tax bill – or increase the rebate you get back from the IRS – through contributing to your retirement savings pot

There are still some moves that it is not yet too late to make, according to certified public accountant Tom Wheelwright

For example, if you have a 22 percent tax rate for 2024 and contribute the $7,000 maximum amount, you would pay about $1,540 less in federal income tax, according to calculations by Money.com. 

To work out a rough estimate of how much you can save from traditional IRA contributions, you can multiply the marginal tax rate by the amount you put into the account. 

But taxpayers should keep in mind that there are some exceptions that can limit the amount you are able to deduct, the outlet reported. 

If you have income over a certain level and you and your spouse have a workplace 401(K) retirement plan, for example, you will not be able to get the full deduction.

But many Americans also do not know they can contribute earned income to a low-earning or non-working spouse’s IRA account if they file a joint tax return as a married couple.

After all, a stay-at-home parent, for example, does not have access to a workplace 401(K) plan. 

This works in the same way as putting money into your own traditional IRA by reducing pre-tax income, said certified public accountant Tom Wheelwright.

It can also double your retirement savings for the year.  

Rather than being able to save $7,000, you can save $14,000, and that increases to $8,000 for you, and $8,000 for your spouse, for a total of $16,000, if you are both aged 50 or older. 

The IRS has specific rules on who can take advantage of this – including that a working spouse must earn at least as much money as they contributed to both of the couple’s IRAs.

This tax season, the maximum amount Americans can contribute to a traditional IRA is $7,000 – or $8,000 for anyone over 50

It comes as the IRS has issued a stark warning to millions of Americans that nearly $1 billion in unclaimed tax refunds from 2021 are still up for grabs.

Around 1.1 million Americans have yet to file their 2021 Form 1040 Federal Income Tax Return, leaving substantial refunds on the table. 

While most taxpayers submitted their returns in 2022, those who didn’t could be missing out on a median refund of $781. 

The deadline to claim the money is April 15.

‘Under the law, taxpayers usually have three years to file and claim their tax refunds,’ the IRS said in a press release. 

‘If they don’t file within three years, the money becomes the property of the US Treasury.’