Maximizing Tax Savings: A Guide to Leveraging Tax-Advantaged Accounts in 2023
Understanding Tax-Advantaged Accounts
If you only make one tax-reducing move this year, be sure to maximize your contributions to tax-advantaged accounts. By understanding your tax bracket and retirement contributions, you can significantly reduce the amount you pay in taxes.
1. Traditional and Roth IRA Accounts
Traditional IRA: Payments reduce current taxable income. Withdrawals are taxed in retirement.
Roth IRA: Contributions are made with after-tax dollars, and withdrawals are tax-free in retirement.
- IRA contributions combined limit: $6,500 (under 50), $7,500 (over 50).
2. Saver's Credit
The saver's credit offers tax credits based on retirement contributions and income levels.
- Saver's credit maximum: $1,000 for individuals, $2,000 for couples.
3. Health Savings Account (HSA)
HSAs provide tax advantages and savings for medical expenses.
- HSA maximum contributions: $3,850 (individual), $7,750 (family).
Maximizing contributions to these accounts can lead to substantial tax savings and financial security.
This article was prepared using information from open sources in accordance with the principles of Ethical Policy. The editorial team is not responsible for absolute accuracy, as it relies on data from the sources referenced.