The New Year has barely gotten started, and if you’re thinking about taxes at all, you’re likely focused on filing your 2022 tax return. While you should certainly be starting to gather those 2022 tax documents, it’s also a good idea to look ahead and think about how you can save on taxes throughout this year. Proper planning and foresight can save you thousands of dollars in taxes, and it all begins as soon as that ball dropped on New Year’s Eve. Keep reading to learn a few things you can start doing now to reduce your 2023 tax bill.

Make Planned Deposits to Retirement Accounts

Saving for retirement is always a smart plan, but it’s also a good tax move. Many retirement accounts provide immediate tax benefits for the deposits you make, including 401k plans and Roth IRAs. Maxing out these contributions provides you with the maximum benefit, but too few people take advantage of that. By the time the end of the year draws around (and all those big holiday expenses), maxing out that retirement account simply isn’t in the cards. It’s usually far more manageable to make regular monthly deposits.

Now is a good time to sit down, go over your finances, and plan out those monthly deposits so that you can take maximum advantage of the tax benefits. And, of course, those monthly deposits will go towards securing your financial future.

Check Your Withholdings

If you’re a W-2 employee, you should have filled out a W-9 form as part of your onboarding paperwork. This form allows you to specify the amount that should be withheld from your paycheck for tax purposes. Many people think that it’s most beneficial to minimize their withholdings and pull in a larger paycheck. However, this also has the consequence of giving you a larger tax bill when you file your return.

This tax season, if you find yourself facing a larger tax bill than you were expecting, it might be a good idea to adjust those withholdings so you don’t find yourself in this situation again next year. You can request a new W-9 from your employer and adjust your withholdings at any time.

Look into Opening Other Tax-Deferred Accounts

Your retirement accounts aren’t the only ones that can offer tax benefits. Accounts like FSAs and HSAs also offer opportunities to reduce your tax bill while contributing to your own future. While these accounts aren’t always available to everyone, it’s a good idea to speak to your employer or insurance provider about whether or not you qualify for one.

Rules vary between these two accounts, but let’s look at HSAs as an example. These savings accounts are usually accompanied by high-deductible insurance plans. Your contributions to the account are tax-deductible and can be used for out-of-pocket medical expenses. That doesn’t just include doctor’s appointments and hospital visits, but expenses like prescriptions and pregnancy tests too. You can even reimburse yourself from this account for expenses that you paid for with your credit card. This allows you to save for those healthcare costs while deducting the HSA contributions from your taxable income.

Another tax-deferred account to consider is a 529 savings plan for your or your child’s education. This is a popular college savings account that can allow you to set aside funds for future education expenses. Most parents establish a college savings plan for their children, and a 529 is a great way to do so while reaping a tax benefit. If you open a standard savings account, your contributions will not be tax deductible.

Plan to Bunch Your Deductions

Many people have recurring deductions that they take every year, such as regular donations to charity. Timing these deductions properly can allow you to double up on deductions every other year, providing you with a higher tax benefit. While the details are complex and require careful, precise planning, the general idea is to have a high-deduction year and itemize all of your deductions; then, in the low-deduction years, you take the standard deduction instead. For many people, this can offer thousands of dollars in tax savings each year.

If you’d like to learn more about bunching your deductions and other ways to reduce your tax bill, contact Peter Witts CPA today. We specialize in working with business owners and government contractors, and can help you to work through your complex tax situation to find a more favorable outcome that could save you significantly on your taxes. Call now to schedule a tax planning meeting with one of our CPAs.