2 Tax Breaks You Won’t Want to Give Up in 2023

This post may contain affiliate links which may compensate us based on your interaction. Please read the disclosures for more information.

Forgoing these is something you might regret. 

The U.S. tax code is fairly complex, but one thing you should know is that it’s loaded with tax breaks. There’s just one problem — a number of those tax breaks require you to file an itemized tax return in order to snag them.

Meanwhile, the tax code got an overhaul a few years ago that raised the standard deduction substantially. So these days, there’s even less incentive for tax-filers to submit an itemized tax return.

But here’s some good news. Not every tax break hinges on filing an itemized tax return. And if you’re looking to lower your tax burden in 2023, here are two specific tax breaks to snag that fall into that boat.

1. A deduction for IRA contributions

Saving in an IRA account is a great way to help ensure you’ll have enough money to cover your living costs as a senior. IRAs come in two main varieties — traditional and Roth. If you put money into a Roth IRA, it won’t serve as an upfront tax break (though there are many other benefits you’ll enjoy with a Roth IRA). But traditional IRA contributions can serve as a tax deduction and exempt some of your earnings from taxes.

In 2023, you can contribute up to $6,500 to an IRA (traditional or Roth) if you’re under the age of 50. If you’re 50 or older, that limit is $7,500.

2. A deduction for HSA contributions

Not every health insurance plan is compatible with a health savings account, or HSA. But if yours is, then it pays to fund an HSA and enjoy not just the benefit of having money available for healthcare costs, but also, a nice tax break.

HSA contributions work just like IRA contributions. You can take a deduction for HSA contributions, and the amount you fund your account with will not count as taxable income for the year.

Now, the amount you can put into an HSA will depend on the health insurance coverage you have as well as your age. If you’re the only person covered on your health insurance plan, you’re limited to a contribution of $3,850 in 2023 if you’re under age 55, or $4,850 if you’re 55 or older. If you have your family covered by your health plan with you, you can contribute up to $7,750 in 2023 if you’re under 50, or $8,750 if you’re 50 or older.

And as a point of clarification, an HSA is different from an FSA, or flexible spending account. HSA funds never expire, so you can carry a balance forward for many years and invest any money you don’t need for medical bills. FSAs make you deplete your plan balance year after year, and there’s no option to invest your money.

Don’t let these tax breaks slip away

Funding a traditional IRA and/or HSA could be a great way to pay the IRS less in 2023. And you can snag a tax break regardless of the approach you take to filing your tax return.

Our picks for best tax software

Our independent analysts pored over the perks and user reviews for the most popular tax provider services to land on the best-in-class picks to file your taxes. Get started by reviewing our list of the best tax software.

We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

 Read More