This Could Be Your Greatest Source of Tax Savings in 2024

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Want to pay the IRS less this year? There’s an easy way to slash your tax bill. Read on to learn more. 

Paying taxes is something nearly everyone has to do. And while you don’t have to be happy about that, you might as well accept it.

But that doesn’t mean you can’t take steps to eke out some tax-related savings. In fact, if you’re eager to pay the IRS less money in 2024, then contributing money to these accounts could be your ticket to slashing your tax bill.

1. An IRA

Anyone with earned income can contribute to an IRA for retirement savings purposes. Now, if you put money into a Roth IRA, it won’t serve as an upfront tax break. But if you fund a traditional IRA, your contribution will go in on a pre-tax basis, which means every dollar you contribute up to the annual limit will be a dollar of income the IRS can’t tax you on (as long as you don’t exceed the income limits set by the IRS).

This year, IRA contributions max out at $7,000 for workers under age 50. Those who are 50 and older can contribute an extra $1,000 for a total of $8,000.

To be clear, contributing $8,000 to an IRA will not mean saving $8,000 in taxes. Your personal savings will hinge on your tax bracket. But if you’re in the 22% bracket, an $8,000 traditional IRA contribution could mean lowering your tax bill by $1,760.

2. A 401(k) plan

If you’re a salaried worker, you may be eligible for a 401(k) plan through your employer. Like IRAs, 401(k)s come in both the traditional and Roth variety. But contributing to a traditional 401(k) could leave you paying the IRS less this year.

In 2024, 401(k) contributions max out at $23,000 for workers under 50, and $30,500 for those 50 and over. If your employer matches your 401(k) contributions, the money it puts in does not count toward your annual limit. So if you’re 35 and get a $3,000 match from your employer, you can still put in $23,000 of your own if you can afford to part with that much of your earnings.

3. An HSA

If you’re enrolled in a high-deductible health insurance plan this year, then you may be eligible to fund an HSA (health savings account). HSAs only come in one variety (there’s no traditional versus Roth), and contributions to that account go in tax free as they do with a traditional IRA or 401(k).

This year, HSAs max out at $4,150 for savers with self-only coverage under 55, or $8,300 for savers with family coverage under 55. The limits are $5,150 and $9,300, respectively, for savers aged 55 and over.

To be eligible for an HSA, you must have a minimum deductible of $1,600 for self-only coverage or $3,200 for family coverage. Your out-of-pocket maximum also can’t exceed $8,050 for individual coverage or $16,100 for family coverage.

Also, some employers contribute money to HSAs on workers’ behalf. Those contributions do count toward your annual limit.

There’s no reason to pay the IRS any more money than you have to. Contributing to these accounts could help you enjoy a nice amount of tax savings this year.

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