4 Tax Credits and Deductions You Can Get Before Year-End

Tax season might seem far away, but we're only about three months away from when the IRS will begin accepting 2023 tax returns. If you're looking to lower your tax bill or boost your refund, there are some highly effective strategies you can use to save hundreds or even thousands of dollars. Here are four in particular that you can use between now and the end of the year that can be great ways to save money now, set yourself up for later, and more.

1. Charitable contributions

If you itemize deductions on your tax return, you can deduct contributions made to qualifying charitable organizations. And while it's a good idea to spread your contributions throughout the year, giving extra at the end of the year can provide you with a nice tax boost (as well as a holiday cash infusion for the organization).

Keep in mind that your donation doesn't necessarily have to be in cash. You could clean out your closet and bring clothes you don't need to your local Salvation Army or similar charitable secondhand store, for example. Did you get a new TV for the holidays? Consider donating the old one. The point is that there are many different ways you could give. Be sure to get a receipt, and you can then deduct the fair value of the items you donate.

2. Workplace retirement plans

If you have a traditional or Roth IRA, you can make deductible contributions for 2023 anytime before the April 2024 tax deadline, so there's no big rush on those. But if you have a 401(k), 403(b), or other qualified retirement plan through an employer, the end of the calendar year is the latest you can make elective deferrals.

For 2023, the elective deferral limit for employees is $22,500, or $27,000 if you're age 50 or older. While it may not be practical (or necessary) to max your contributions out, if you can increase your contribution rate for the last couple months of the year, it could save you money on taxes as well as help set you up for a more comfortable retirement later on.

3. Health savings account contributions

If you have a qualifying high-deductible health plan, either through your employer or as a self-employed individual, you can contribute money to a health savings account, or HSA.

The HSA is one of the best savings tools you can contribute to, as it has a rare triple tax advantage. Contributions can be tax-deductible, money in the account can be invested, and any withdrawals made for healthcare expenses are 100% tax free. And unlike a flexible spending account, or FSA, money in a health savings account can be rolled over from one year to the next.

Perhaps best of all, after you turn 65, money in a health savings account can be used for any reason, so while it can be a great way to budget for healthcare expenses, it can also double as a supplemental retirement plan.

For 2023, eligible individuals can contribute as much as $3,850 to an HSA with single healthcare coverage or $7,750 with family coverage, and there's an additional $1,000 allowance if you're age 50 or older.

4. Tax-loss harvesting

Considering how the stock market has performed in 2022 and 2023, it's fair to assume that many people reading this have some investments in their stock portfolios that are worth less than they paid for them. If this applies to you, using a tax-loss harvesting strategy could be worth looking into.

Basically, if you sell an investment at a loss, you can use that loss to offset any capital gains during the year. For example, if you sold an investment earlier in the year at a $5,000 gain and now sell another stock at a $4,000 loss, it would lower your taxable capital gain to $1,000. If you didn't have any capital gains, you can use this to lower your other taxable income by as much as $3,000.

To be sure, harvesting losses isn't a smart move in all cases. If you still believe in the investment long term, lowering your taxes isn't a great reason to sell all by itself. But if you have stocks that you've been thinking about moving on from, this strategy could be a good one to use.

Several ways to save

With about two months left in 2023, it's a good time to start planning some end-of-year tax strategies. And as you can see, there are some great options that could be available to you.