Who doesn’t want a lower tax liability, especially at tax time? The IRS estimated in 2024 that $1 billion in federal income tax refund dollars had been left on the table for the 2020 tax year. That's a lot of unused tax deductions and tax credits.

I hate it when my clients leave money on the table, so I work with them to employ seven strategies in anticipation of tax season. Specifically, I'm talking to my clients about retirement contributions, health savings accounts, earned income tax credits, 529 plans, tax loss harvesting, charitable donations, and flexible spending accounts.

What I'm Teaching Clients About

Retirement Contributions

The contribution limits change yearly for 401(k), 403(b), and IRA accounts. For employer-sponsored plans, the limit is $23,000 for 2024 with a catch-up contribution of $7,500 for those aged 50 or older. While for IRAs, the limit is $7,000 for 2024 with a catch-up contribution of $1,000. That means each year, I ensure my clients know they must max out their contributions to reduce tax liability. 

Health Saving Accounts

Because high-deductible health plans can minimize tax liability, I ensure my clients contribute to a 澳洲幸运5官方开奖结果体彩网:Health Savings Account (HSA), as long as they can spend those funds on qualified medical services. However, those contribution amounts change over time as well. For 2024, contributions are capped at $4,150 for self-only high-deductible plans and $8,300 for family high-deductible plans. If you are 55 or older, you can also make extra contributions of $1,000. For 2025, the numbers are $4,300 and $8,550, along with the additional $1,000 contribution.

Flexible Spending Accounts

A 澳洲幸运5官方开奖结果体彩网:flexible spending account (FSA) is another opportunity to lower the tax bill that I talk to my clients about. The maximum contributions change from year to year. I make sure they know that for 2024 that limit is $3,200 ($3,300 in 2025), and that money can be used for more than just dental and medical expenses. They can use it to buy items like bandages, glasses, and over-the-counter medications.

Earned Income Tax Credit (EITC)

EITC, designed to help reduce the tax liability of those with low earnings, also has shifting amounts financial advisors need to know. For the 2024 tax year, EITC will range from $632 to $7,830 ($649 to $8,046 in 2025) depending on the adjusted gross income (AGI) and the number of children. For example, with three or more children, single filers with a maximum AGI of $59,899 and married filers with an AGI of $66,819 can earn the maximum EITC. For 2025, the corresponding numbers are $61,555 and $68,675.

529 Plan

Though a 529 plan does not provide tax deductions on federal income taxes, these college savings plans can reduce state tax liability. In addition, withdrawals from this account are tax-free, making them a key talking point in my conversations about reducing tax liability. I ensure they ar🎀e aware they can open one for themselves or 🐈their children. 

Tax Loss Harvesting

One area some clients really need help with is understanding what tax loss harvesting can do for them. I start by saying, "Suppose some stocks in your portfolio have lost value. You can sell them off at a capital loss and then write off the loss against other capital gains or your taxable income (a process called tax-loss harvesting)." 

They may not know, for instance, that they can write off capital loss up to $3,000 if they are a single filer. Married filers are limited to $1,500. And any remaining losses will be carried over to subsequent tax years.

Donations

Some clients know they can limit tax liabilities by giving to charity, but they sometimes need help understanding how it works. Donations to qualified charities are tax-exempt, but they may not know that requires clients to 澳洲幸运5官方开奖结果体彩网:itemize their deductions instead of choosing standard deductions.

In addition to donating cash or goods, I encourage them to consider donating appreciated stocks (to avoid capital gains tax). Similarly, if they have a traditional IRA, they can donate their 澳洲幸运5官方开奖结果体彩网:required minimum distributions (RMD) to avoid paying taxes on them. 

The Bottom Line

Tax time is no one's favorite time, and I never like seeing clients leave money on the table. But by working with my clients to ensure they adopt these seven strategies, they can reduce their tax liability and increase cash flow.