It’s Not Too Late: Here Are 4 Last-Minute Tax Tips To Consider Before Filing
If you haven’t filed your tax return for 2023 yet, it’s time to kick things into gear. The filing date for 2024 is April 15 — April 17 if you live in either Maine or Massachusetts — and if you’re late with your filing, you could trigger some serious consequences. Specifically, failing to get your return in on time will cost you 5% of your unpaid taxes for each full or fractional month that you are late, with a cap of 25%. So, if you owe $10,000 in taxes and don’t file your return until September, you can expect to owe an additional $2,500.
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But that’s a worst-case scenario only. In some ways, waiting to file until the absolute deadline can actually work to your advantage. This is because you can still make some tax-saving or tax-advantaged moves all the way up until the last minute. Here are some of the last-minute tax tips you might want to consider.
Maximizing Your IRA and HSA Contributions
One of the major benefits of IRAs and HSAs is that you can make “prior-year” contributions all the way up to the April 15 tax deadline. So, if you’re looking to reduce your taxable income and have the money, you still have time to max out your IRA and/or HSA contributions.
Imagine you only contributed $2,000 to your IRA in 2023, for example, but you have a $5,000 year-end bonus just sitting in a savings account. You can slide over $4,500 of that $5,000 into your IRA, thereby maxing out your contribution of $6,500 for 2023.
Note that you’ll have to inform your IRA custodian that you are making a “prior-year” contribution for tax year 2023 to benefit from this move before April 15. But if you’re in the 22% federal tax bracket, you could save an additional $990 in taxes just by making this last-minute contribution. And if you’re 50 or older, you can even sock away an additional $1,000 thanks to the “catch-up contribution” provision for older Americans.
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Review Your Itemized Deductions vs. the Standard Deduction
In 2017, the Tax Cuts and Jobs Act in 2017 almost doubled the standard deduction, dropping the percentage of Americans who itemize down from about 31% to about 11%. But that still means that millions of Americans are better off itemizing their deductions, and you might be one of them. In addition to the big, well-known deductions, like the mortgage interest deduction, there are plenty of smaller ones that can add up and push you beyond the standard deduction threshold. According to TurboTax, here are the some of the most overlooked itemized deductions:
State sales taxes
Reinvested dividends (some investors fail to increase their cost basis)
Charitable contributions made out-of-pocket
Student loan interest — even if paid by someone else
Moving expenses for military personnel
State tax you paid in Spring 2023 for tax year 2022
Refinancing mortgage points
Jury duty paid to an employer
Whether or not these specifically apply to you, it’s worth the effort to do a last-minute review of whether or not you should itemize.
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Don’t Overlook Tax Credits You’re Entitled To
A number of tax credits are available for a wide variety of activities the IRS deems socially beneficial. Educational tax credits like the American Opportunity Credit and family oriented ones like the Child Tax Credit are fairly well known, but you may be entitled to some less popular tax credits as well.
Various energy-efficient upgrades to your home, for example, may snag you as much as $3,200 in tax credits. These can range for anything from the energy-efficient windows to biomass stoves. The Retirement Saver’s Credit can provide up to a $2,000 credit for joint filers who meet income and contribution requirements. When it comes to credits, the list can be long, so it’s a good idea to work with a tax advisor or at least high-quality tax software so that you don’t overlook any possible credits.
File an Extension
If all else fails, take advantage of the free six-month extension to file your taxes that the IRS grants to everyone. It’s a much better idea to take the extra time to submit an accurate return than it is to rush the submission of an incomplete or inaccurate return. Not only might you face additional taxes and penalties, you’ll still have to do the work correctly at some point anyway, so you might as well take the time now and make sure everything’s in order.
Just remember that while you can get a free six months to file your return, the money you owe is absolutely due on April 15. Even if you’re not exactly sure what your tax liability will be, make sure to submit a check for a reasonably close amount when you file for your extension or else the failure-to-pay penalty will kick in immediately.
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This article originally appeared on GOBankingRates.com: It’s Not Too Late: Here Are 4 Last-Minute Tax Tips To Consider Before Filing
