Is There Anything That I Can Still Do to Maximize Tax Savings for the 2020 Return?

With the tax season in full swing, you might feel like it is too late to recoup and maximize savings for this year. However, there is still time. 

Is There Anything That I Can Still Do to Maximize Tax Savings for the 2020 Return?

Yes, there are still things you can do to maximize tax savings for the 2020 return. Consider a Health Savings Account (HSA). HSAs allow you to pay for certain medical expenses on a pretax basis. If you meet certain requirements for 2020, your HSA contribution can be up to $7,100 for family coverage and $3,550 for single coverage (plus an additional $1,000 if you’re 55 or older) and can be made regardless of your income level. These contributions are 100 percent tax deductible above-the-line, so you benefit even if you don’t itemize or are subject to high-income itemized deduction phaseouts. You can then take tax-free withdrawals to pay for uninsured medical expenses. A provision of the CARES Act now allows withdrawals to be made tax-free to pay for the cost of over-the-counter medications, retroactive to January 1 of 2021.

Retirement account contributions. Consider increasing contributions to your Roth or traditional IRA. The maximum contribution limit is $6,000, or $7,000 if you are age 50 or older. You may also be eligible to still make contributions to other self-employed retirement savings account such as a SIMPLE or SEP. Contributions to these type accounts can be made through April 15, 2021. The SEP contribution can be made any time up through the extended filing deadline.

For more Tax Return Considerations, click here. 

Davis & Hodgdon Associates CPAs has been assisting individuals and businesses throughout Vermont and New England for more than 30 years so please reach out to us in Williston (802-536-1831) or Rutland (802.775.7132) to talk with a tax professional today. You can also email us at [email protected].