Strategies to Optimize Your FY23 Taxes Just in Time: A Last-Minute Guide Before April 15

As the April 15 deadline fast approaches, many of us scramble to find ways to optimize our financial situations and minimize tax liabilities for Fiscal Year 2023. Believe it or not, there are still several strategies you can employ in these final days that can significantly impact your tax bill. Here's a rundown of last-minute tax planning tips you can act on now.

Maximize Retirement Contributions

For Individuals: One of the simplest ways to reduce your taxable income is by maximizing contributions to your retirement accounts. For FY23, you can contribute up to $6,000 to IRAs, with an additional $1,000 catch-up contribution if you're 50 or older. The same goes for 401(k)s, where the limit is $20,500, plus a $6,500 catch-up. These contributions can directly reduce your taxable income, potentially saving you thousands.

For Business Owners: Consider enhancing your retirement savings plan for employees. SEP IRAs and SIMPLE IRAs not only provide retirement benefits but also offer tax deductions on contributions. A SEP IRA, for instance, allows contributions of up to 25% of each employee's pay (up to a certain limit), which can be a substantial deduction for your business.

Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs)

HSAs: Contributing to an HSA is a wise move if you're enrolled in a high-deductible health plan. Contributions are tax-deductible, the funds grow tax-free, and withdrawals for qualified medical expenses are also tax-free. The FY23 contribution limits are $3,650 for individuals and $7,300 for families.

FSAs: If you have a Flexible Spending Account, now is the time to use those funds. FSAs are use-it-or-lose-it, so review your balance and spend on eligible expenses like prescriptions, glasses, or even some over-the-counter medications.

Tax-Loss Harvesting

This strategy involves selling investments that are at a loss to offset capital gains taxes on other investments. It's a nuanced strategy that requires a good understanding of the wash-sale rule, which prohibits claiming a tax deduction for a security sold in a wash sale. Consulting with a financial advisor here is crucial.

Charitable Contributions

Making charitable contributions can not only support causes you care about but also provide a tax deduction. Whether it's a direct donation, contributing to a donor-advised fund, or gifting appreciated stock (avoiding capital gains tax), charitable giving can be an effective tax-saving strategy.

Bunching Deductions

This strategy involves timing your deductible expenses to maximize tax benefits. By accelerating or delaying deductions, such as medical expenses or charitable contributions, into a single tax year, you may exceed the standard deduction limit and claim higher itemized deductions, reducing your taxable income.

Conclusion

While these strategies can offer significant savings, they require careful consideration and planning. Always consult with a tax professional to ensure these last-minute moves align with your overall financial goals and situation. Time is of the essence, so don't wait until it's too late to take action.

Remember, the goal of last-minute tax planning is not just about saving on taxes for FY23 but also setting a strong foundation for your financial future. Act now, consult with professionals as needed, and take control of your financial destiny.

Please note: The insights shared here are based on my personal opinions and should not be considered professional advice.