1. Contribute to Retirement Accounts

Contribution limits went up for the 2023 tax year, so double-check to make sure you’ve contributed all you can to employer-based 401(k) plans and individual retirement accounts (IRAs). Contributions to traditional IRA and 401(k) plans are tax-deductible in the year the contribution is made.

In 2023, you can contribute up to $6,500 to your combined IRA accounts, with an additional $1,000 catch-up contribution if you’re age 50 or older. The 2023 contribution limit for 401(k) retirement plans is $22,500, plus a catch-up contribution of $7,500 for people 50 and older.

2. Consider Your Roth Options

Contributions to Roth IRA and Roth 401(k) plans are made with after-tax dollars, so you can’t deduct the money you put into a Roth. However, Roth accounts offer tax-free withdrawals, which can save you money in retirement and help defuse a retirement tax bomb.

Roth IRAs and traditional IRAs are subject to the same combined contribution limits. Additionally, you must meet income requirements to contribute to a Roth IRA. Income eligibility begins phasing out for single filers, heads of household, and married people filing separately at $138,000 in 2023. For joint filers, the phase-out range begins at $218,000.

3. Take Required Minimum Distributions to Avoid Penalties

You must take required minimum distributions (RMDs) from tax-deferred retirement accounts beginning at age 72 (or 73 if you turn 72 in 2023 or later). If you fail to take RMDs by the end of the year, you could be subject to a 50% excise tax on the amount you were supposed to withdraw.

4. Offset Your Capital Gains

When you sell investments for less than you paid for them, you can use the resulting capital loss to offset any capital gains you’ve made during the year. You can offset all of your capital gains for the year with these losses, and use up to $3,000 of remaining losses to reduce your regular income. Leftover losses may be carried forward into future years.

5. Review Itemized Deductions

Most taxpayers choose to take the standard deduction instead of itemizing. But if your itemized deductions are greater than the standard deduction for your tax filing status, you may want to take a closer look at potential deductions. Here are a few to consider:

• Interest paid on your home mortgage
• State and local income taxes
• Property taxes
• Sales tax
• Gambling losses
• Moving expenses
• Losses from a federally declared disaster

6. Check Health-Related Deductions

Before the year ends, you may want to check in on various health-related expenses.

Single taxpayers can make HSA contributions of up to $3,850 (families up to $7,750) if they have an HSA and qualifying high-deductible health insurance. HSA contributions are tax deductible in the year they’re made. The money also grows tax-free and is not taxed when you withdraw it to pay for health-related expenses.

7. Make a Charitable Donation

If you itemize, you may be able to deduct charitable contributions of money or property, up to 60% of your adjusted gross income. The IRS has detailed rules on charitable contributions; not every charity or contribution will earn you a tax deduction.

8. Take Advantage of Increased 529 Limits

Contributions to 529 educational plans aren’t tax-deductible. However, 529 college savings accounts do offer tax advantages. Your money grows tax-free in a 529 and is not subject to taxes when you (or the beneficiary of the account) withdraw it to pay for qualifying educational expenses.

9. Defer Income

Do you expect a large year-end bonus, payment for freelance work, or any other taxable windfall before the year’s end? You may want to try deferring that income to next year so it doesn’t add to this year’s tax bill.

10. Look for Eligible Tax Credits

Pandemic-era expanded tax credits have largely expired, but you may still qualify for refundable and non-refundable tax credits that can reduce your tax bill dollar for dollar. These may include:

• Earned income tax credit
• Child tax credit
• Child and dependent care credit
• Saver’s credit
• Residential clean energy credit