Written By: Alex Hammersley, CPA

As year-end quickly approaches, we could find ourselves in a pinch to make last-minute financial and tax moves. Luckily, there are a few accounts that can be contributed to in 2024 and still count towards the 2023 tax year. That’s right. You can contribute to a Roth IRA, Traditional IRA, or Health Savings Account by the tax deadline of April 15^th, 2024.

The Roth IRA is an investment account that can be contributed to yearly if you have earned income (wages and/or self-employed income). The 2023 contribution limit is $6,500 for those under age 50 and $7,500 for people ages 50 and older. A taxpayer contributes after-tax money to a Roth IRA, so there is no immediate tax deduction for contribution to this account. The benefit of the Roth IRA is that you can invest your dollars and the growth of your investment is completely tax-free. When you take distributions from the Roth IRA after age 59 ½, you pay zero tax on the amount taken out of the account.

The Traditional IRA is an investment account that can also be contributed to yearly if you have earned income. The 2023 contribution limits are the same as the Roth IRA limit mentioned in the previous paragraph. When a taxpayer contributes to a Traditional IRA, they get an immediate tax deduction in the tax year of contribution. The deduction directly offsets any tax owed on your individual tax return. When you pull money out after age 59 ½, you pay tax on the full distribution amount at the ordinary tax rates.

I want to go in-depth regarding the Health Savings Account (HSA) because this investment vehicle is not as commonly understood as the Traditional & Roth IRAs. An HSA is a tax-advantaged savings account designed to help individuals with high-deductible health plans (HDHPs) save money for qualified medical expenses. HSAs offer a triple tax advantage, providing tax benefits at the time of contribution, during the account’s growth, and when funds are withdrawn for qualified medical expenses. Here are the key features and benefits of Health Savings Accounts:

• To open and contribute to an HSA, individuals must be covered by a high-deductible health plan (HDHP). The IRS sets specific criteria for what qualifies as an HDHP, including minimum deductible amounts and maximum out-of-pocket limits.
• The IRS sets annual contribution limits for HSAs. Contributions are made on a pre-tax basis, meaning they are tax-deductible in the year they are made. In 2023, for example, the contribution limit is $3,650 for individuals and $7,300 for families. Individuals age 55 or older can make additional catch-up contributions of $1,000 more than the annual limit until they reach age 65 and enroll in Medicare.
• Contributions to an HSA are tax-deductible, reducing the individual’s taxable income for the year. The funds in the HSA can be invested, and any earnings on the investments grow tax-free.
• Withdrawals from the HSA are also tax-free if used for qualified medical expenses. These expenses include a wide range of medical, dental, and vision costs, such as doctor visits, prescription medications, and certain preventive care.
• Unlike flexible spending accounts, HSA funds roll over from year to year. There is no “use it or lose it” requirement, allowing individuals to accumulate savings over time.
• While withdrawals for qualified medical expenses are tax-free, if funds are withdrawn for non-medical purposes before age 65, they may be subject to income tax and a 20% penalty. After age 65, withdrawals for non-medical expenses are subject to income tax but not the penalty.
• To learn more about HSAs, go to HealthCare.gov

If you are thinking about making a last-minute tax move, contact us. We would love to navigate the available options and get you contributed for the tax year 2023 by the 4/15/2024 due date.

If you answered ‘no’ to any of these questions – we’d be glad to help you become more prepared. 

Say What?

Gen Z, millennials say money talks should happen before the relationship gets serious, study finds

The article highlights:

• Nearly 32 percent of Gen Z adults and 40 percent of Millennials say honest conversation about your finances and long-term goals should happen before relationships get serious.
• Over 2,700 surveyed online between February and March of 2023.
• Both generations have experienced several bouts of market and economic turmoil including the pandemic.
• Across all generations 72 percent of Americans believe couples should talk about their finances before living together.

This week in history:

1843 (Dec. 19) – A Christmas Carol by Charles Dickens was published in London.

1891 –The first game of basketball was played when James Naismith decided to test the new game he invented.

1903 (120 years ago) – Orville and Wilbur Wright made the first successful flight in history near Kitty Hawk, North Carolina.

1957 – 22-year-old Elvis Presley received his official draft notice for the U.S. Army while spending Christmas at Graceland, his newly purchased Tennessee mansion. He attained the rank of sergeant during his service.

1973 (50 years ago) – “The Sting” starring Paul Newman and Robert Redford opened in theaters.

1973 (50 years ago) – Iconic horror film “The Exorcist” opened in theaters.

Dad Joke Of the Week:

Question: What New Year’s Resolution should a basketball player never make?

Answer:  To travel more.

Have any questions? That’s what we’re here for! Call us at 844-227-5766 today!