@Pbenitez12 wrote:
" Besides maxing out 401(k) contributions if we currently exceed the 300 K are there any other avenues we can utilize to lower our AGI to take advantage of the tax credit? "
Great question, Pbenitez12!
In addition to maximizing your 401K contributions, there are a few other ways to reduce your adjusted gross income, including the educator expense, the student loan interest deduction and HSA contributions.
- You can claim the Educator expense deduction, regardless of whether you take the Standard Deduction or itemize your tax deductions. The maximum deduction is $300 for one teacher (tax year 2023). Two married teachers filing a joint return can take a deduction of up to $300 a piece, for a maximum of $600.
- The Student loan interest deduction is a deduction of the interest you paid during the year on a qualified student loan. The maximum deduction you can claim is $2,500 this year – but it’s limited by your income, ($90,000, if single, and $180,000 for married filing jointly, for 2023.)
- Health Savings Accounts can lower your madjusted gross income as the money you contribute is non-taxable, just like when you contribute to a traditional 401k or similare retirement accounts. You can contribute up to $3,850 for a self only plan or up to $7,750 for a family plan. Those ages 55 and up, can contribute up to an additional $1,000 as well to their HSA. This contribution can be made up until the due date of your return, so you can decide to make a contribution for the current year up until the tax deadline, for the due date of the return (4/15/2024.) Not all taxpayers are eligible to have an HSA. To qualify, you must be enrolled in a high deductible health insurance plan that meets the IRS requirements.
*For further information on these topics you can reference the following articles:
Teacher Educator Expense
Student Loan Interest Deduction
HSA Contributions
Thanks, and please reach out with any additional questions you may have.
Terri Lynn
