Are you trying to save more money when filing your taxes this season? We got your back!

With tax season looming upon us, it is best to try to get our tax files in order and prepared for filing (as well as look into how to save some money). After all, you do not want to end up having to gather all those papers in the last hour, and if you are prepared in advance, you may be able to save some money on your tax bill if you are smart about your finances.

Be it that you are a retiree and you are trying to save as much of your nest egg as possible or that you are going to retire soon, it is never too soon to preserve more of your hard-earned dollars. Here are some of the most effective legal ways to save money on your tax bill!

Let us know in the comments what your money-saving tips and tricks are in the comments section!

#1 Review all your securities, stock performance, and mutual funds

Have you heard of tax loss harvesting? If you have securities, mutual funds, and stocks, you may be able to reduce your tax bill and save some money through this procedure. Tax loss harvesting is a procedure that implies selling stocks and other investments of the sort that are underperforming.

By selling this stock, for example, because it is losing you money instead of creating it, you can use the loss it created to reduce the tax that you will be hit with on your capital gains. You can end up offsetting up to $3,000 of your ordinary income if the investment you sold qualifies for tax-loss harvesting.

The best way to make sure that this method of saving money works for you is to talk with a tax professional so that they can guide you and give you an accurate action plan.

#2 Boost up that HSA account!

This one is easier to do if you are already on an HDHP (a high-deductible health plan) and you are still employed; otherwise, it may be a bit more difficult. But either way, you can still look into accessing an HSA (a health savings account), which is going to help you save money when you have to pay out of pocket for medical expenses.

Not only is this one of those things that are going to help you in the long run when it comes to having to pay for things that are not covered by your insurance or by Medicaid, but it can also be a way to save some money on your taxes.

HSA accounts made through payroll are going to grow not only with pre-tax money, but they are also growing tax-free, and if you have to make any withdrawals, those aren’t going to be taxed either! So you will not be losing money but saving in the long run, and it is a great way to do things even if you are only a few years away from retirement.

#3 Adding to a 529 account!

It may not be something that you have on your radar, but those 529 college savings plans could end up helping you save on taxes! Sure, you may not end up going to college, but it can always be a nice and happy surprise to help a nephew or niece with their college funds. And when you add in the fact that you will be able to save money on taxes, it becomes a nicely wrapped package!

Contributions to 529 accounts are made with after-tax money, but when you invest, the earnings are tax-deferred. Not to mention, there is no tax added on money that is used for educational expenses, so those contributions will not end up being taxed. What’s more, there is a chance that your contributions to a 529 may be eligible for tax credits or deductions at the state level!

#4 Take advantage of all the tax deductions that you are eligible for!

Another way in which you can save money when doing your taxes is to make sure that you take all the tax deductions that you can. Not only as a senior but also throughout your life, you will be eligible for a number of deductions from your overall income tax, and you should make sure to check and do everything you can in order to take advantage of these. After all, why pay more money than needed on taxes when you can save them for other purposes?

The tax deductions you could be eligible for are:

• Part of your home property taxes and even your home mortgage: this one is available to all taxpayers, whether you itemize or not, which is why you should contact a tax professional if you were unaware of it before.
• If you have installed gadgets or replaced things around your home to make it more energy efficient, there is a chance you qualify for energy tax credits. From solar hot water to windows, most improvements could make you eligible, so check the guidelines on the IRS website.
• For an electric car. Like with the previous point, you should check the number of credits and what cars are eligible on the site.
• If you still have dependents under the age of 18 on your tax record, you could get an expanded child tax credit (CTC) and get some credit. Check the details and what counts towards CTC eligibility on the IRS website.

#5 Make more contributions to your retirement account in order to reduce the taxable income

If you are close to retirement age or you will be retiring later this year, it is a great idea to make more contributions to your retirement accounts before this tax season in order to reduce your taxable income. This means that if you have a 401(k), 403(b), or traditional IRA, you can easily cut down on the final sum you are going to get taxed on.

The contributions to these types of accounts are generally made with pre-tax dollars, so if you have some money and you add it as a contribution to either of those three savings accounts we mentioned, you will be reducing the final sum of your taxable income.

Not to mention, if you are over the age of 50, you can make what are called catch-up contributions (check your plan to see how they define it and what the limitations are), and thus you can reduce between $1,000 and $7,500 depending on the type of account. Look into what types of extra contributions you can make, and you will see how easy it is to save more money. After all, not only are you adding more money to your nest egg, but you are also spending less in taxes!

#6 File your taxes on time to save money

This is the simplest way to avoid paying more taxes than necessary, and it’s also a great way to save that money for something else. After all, even if you do not think you will be able to file your taxes in time, it is very easy to file for an extension and then take your time to do your taxes. In the end, you’ll save your wallet, as well as stress and other financial issues.

If you do not file your taxes by your state’s deadline or by the extension in order to get more time to file them, you will face hefty fines and will end up having to pay even more than before simply because you did not do this. Being on time or getting an extension is going to be a lifesaver, and it is the best way to go, no matter what other methods you may be using to save some extra money.

If you apply for an extension, it would also be a good time to look into your tax credit and tax deductions so you have a better idea of how much you will have to pay in taxes. Tax deductions are going to cut down on the income from which your taxes are going to be calculated, while the tax credit is the one that is going to reduce the total income tax you will owe (if you need to brush up on your tax terms, make sure to read up on them ahead of time).

Like always, the deadline will vary state-by-state, but the estimated date everyone keeps in mind is April 18, 2023.

And to make sure that you are all set when the time comes to start filing, make sure you have covered all these preliminary steps ahead of time!