Three Deduction Opportunities to Consider This Tax Season
Posted April 2023
’Tis the season … tax season, that is. While not as full of joy and celebration as the traditional holiday season, tax season provides a different type of enjoyment for those who are able to save a significant amount on their tax bill. Before you file your tax return this year, here are some last-minute things to consider to provide additional tax savings on your 2022 taxes:
Make a contribution to your IRA
If you are still working, you can make a contribution to your IRA before April 18, 2023, and deduct it from your 2022 taxes. Contributions to either a traditional IRA or a Roth IRA qualify. Your contribution limits are based on your income, and the maximum contribution is $6,000—or $7,000 if you are over the age of 50.
If you are self-employed, contributions to an SEP plan are limited to 25% of your net income up to $61,000 and can be made up to the time of your filing should you utilize an extension.
Make a contribution to your health savings account (HSA)
If your health insurance plan qualifies as a “high deductible health care plan,” you can open an HSA—which acts as a pot of money you can use to cover health care expenses. Like an IRA, the money in your HSA can be invested and grows tax-free. Unlike an IRA, any withdrawals from your HSA for health care expenses are tax-free.
Any contributions to your HSA before April 18, 2023, can be deducted on your 2022 Form 1040. Contribution limits are $3,650 if you have health coverage just for yourself and $7,300 if you have coverage for your family.
Deduct your expenses of volunteering for charity
Many people give generously of their time and talents to a wide variety of charitable organizations. Did you know that many unreimbursed out-of-pocket expenses that you incur while doing charitable volunteer work are tax deductible?
You can deduct car expenses such as the cost of gas and oil related directly to your volunteer activities but not general repair or maintenance expenses. You can track the amount you spend on gas, or you can keep track of your mileage and deduct it at 14¢ per mile. You can also deduct the cost of parking fees, tolls, and unreimbursed travel expenses if your travel away from home was primarily for performing services for the charity and not for personal pleasure.
Don’t be confused by what you cannot deduct as a charitable contribution
There are multiple opportunities each year to help others. Not all of your assistance is tax deductible as a charitable contribution, however. Here are a few things that may seem deductible but are not: blood donations, the value of your time conducting volunteer work, charity raffle/bingo tickets, gifts to individuals through things such as GoFundMe payments or scholarships held at a bank, and political donations.
Remember that the filing deadline this year is April 18, 2023, and the deadline for those utilizing an extension is October 16, 2023. Enjoy this year’s tax season!
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