No matter what time of year it is, you need to think about how to save money on your taxes. Taxes are a big deal, and it can leave you wondering if you’ll get a refund or have to scramble to pay Uncle Sam.
The good news is that even if you’ve already earned a lot of your income for the year, you can still make changes to soften next year’s tax bite.
Don’t worry — we’re not talking about tax evasion, but there are some legit ways to keep more of your hard-earned dollars in your pocket.
9 Simple Ways to Pay Fewer Taxes in 2025
Here are several ways to save money on taxes before the next tax season.
- Step up your 401(k) contributions
- Max out a traditional IRA
- Contribute to a health savings account
- Don’t forget your FSA or dependent care expenses
- Save money for your kid’s college fund
- Pay off some student loan debt
- Know your itemized deductions
- Take advantage of tax credits
- Adjust your withholdings
1. Step Up Your 401(k) Contributions
Lowering your taxable income is one of the best ways to pay less in taxes.
The easiest way to reduce your taxable income is to contribute to tax-deferred retirement accounts, like your company’s 401(k) plan or some other type of workplace retirement plan, like a 403(b) plan.
Money you contribute to a 401(k) is pre-tax money, and it helps lower your taxable income for the year you make the contribution. A lower income means less money you pay to the government.
So, if you make $50,000 in 2024 and contribute $3,000 to your workplace 401(k), it looks like you only made $47,000 in the eyes of the IRS.
For 2024, you can contribute up to $23,000 for those under 50, and up to $30,500 for those 50 and older. This doesn’t include the amount your employer contributes to your plan.
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2. Max Out a Traditional IRA
Just like that company-sponsored retirement plan we were talking about, the funds you contribute to your traditional individual retirement account (IRA) don’t count toward your taxable income.
This type of retirement account is different from a Roth IRA, where contributions are taxed today but then grow tax-free thereafter.
For 2024, you can contribute up to $7,000 to an IRA, or $8,000 if you’re over the age of 50.
You usually have until April 15 of the following year to max out your IRA contribution.
An important caveat: You may not get the full tax benefit of contributing to both a 401(k) and an IRA if you or your spouse is covered by an employer-sponsored retirement plan.
If you have access to a 401(k), you need to have a Modified Adjusted Gross Income (MAGI) of less than $73,000 in 2024 as a single person (or $116,000 as a married couple filing jointly) to get the full IRA tax deduction. The tax benefit phases out for people with higher incomes who are covered by an employer retirement plan.
Head to the IRS website for full details on these phase-out limits.
3. Contribute to a Health Savings Account
A health savings account (HSA), is a great tax-exempt option if you have a high-deductible health plan.
Your payroll contributions to an HSA are made with pre-tax income (aka you’re not taxed) and neither are your withdrawals, as long as they’re used to pay qualified medical expenses.
In 2024, the annual contribution limit is $4,150 for self-only coverage and $8,300 for family coverage. People 55 and older can contribute an extra $1,000 as a catch-up contribution.
You can also make direct contributions to your HSA on your own and claim a tax deduction for that amount when you file your tax return. This can be a quick and easy way to reduce your tax burden before the end of the year.
Just remember: Your payroll and personal HSA contributions cannot exceed the annual limit when combined.
You can leave funds in your HSA indefinitely because they’re not subject to required minimum distributions. (And if you’re like most of us, you’ll have more health care-related costs as you get older, anyway.)
4. Don’t Forget Your FSA or Dependent Care Expenses
A flexible spending account (FSA) is similar to an HSA in that you’re allowed to contribute pre-tax dollars from your paycheck each year.
And yes, that means you can reduce your taxable income with an FSA, therefore paying less in taxes.
The limit in 2024 is $3,200.
Keep in mind you’ll have to use up the money during the calendar year on qualifying expenses for you and qualifying dependents.
Have dependents — aka children or elderly members of your household — you’re taking care of? If your employer offers a dependent care FSA account, you can contribute up to $5,000 in pre-tax dollars to go toward expenses such as day care, after-school care and preschool.
Why not save money on child care and on your tax bill at the same time?
5. Save Money for Your Kid’s College Fund
If you have kids, chances are you’re already gritting your teeth thinking about paying for college.
According to the Education Data Initiative, the average cost of college tuition is about $9,750 per year at a public in-state school and $38,768 for private school students living on campus (yikes!).
To help pay these costs, and hopefully save yourself some money on taxes, consider opening a 529 savings plan.
This account is an investment vehicle specifically built for educational savings. You can use it for your kids’ college tuition or to send yourself or your spouse to school.
The exact tax benefits vary by state — more than 30 states offer full or partial tax deductions or credits on 529 contributions.
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6. Pay Off Some Student Loan Debt
Depending on your modified adjusted gross income (MAGI), you may be able to deduct up to $2,500 in student loan interest when you file taxes.
This is an “above-the-line” deduction, which means you can take it even if you opt for the standard deduction.
7. Know Your Itemized Deductions
Several tax deductions are only available if you itemize.
A majority of Americans — about 87.3% — take the standard deduction, which is $14,600 for single filers or $29,200 for joint filers for the 2024 tax year.
Itemizing only makes sense if you have enough deductions to exceed the standard deduction — which most people don’t.
If you itemize your taxes, here are a few deductions that can help lower your tax bill.
Major medical bills: In general, if you’ve spent more than 7.5% of your adjusted gross income (AGI) on qualified medical expenses, you may be able to write them off if you itemize your deductions.
Charitable donations: Looking for a way to pay less in taxes…and get that warm, fuzzy feeling? Charitable contributions are tax-deductible if you itemize your deductions. Make sure to track the estimated value of your contributions to save you time when you file.
Mortgage interest and local property taxes: These may both be eligible for partial deductions, though you’ll need to itemize your tax return.
Business-related deductions: If you’re a freelancer or work from home, you should also look into business-related deductions such as the cost of your home office space.
You might also be able to deduct certain supplies, travel expenses, or meals and entertainment.
8. Take Advantage of Tax Credits
In certain scenarios, the IRS extends tax credits to eligible taxpayers. Tax credits count as an actual reduction of your total tax bill. (Remember: Tax deductions reduce your taxable income.)
If the tax credit is refundable, you’ll get a refund if your tax credits exceed what you owe.
For instance, if you owe $500 and claim $1,000 in tax credits, not only will your payment be waived, but you’ll also receive a $500 tax refund.
Here are a few tax credits you may qualify for:
American Opportunity or Lifetime Learning Credits: Depending on your enrollment status, AGI, and how you’ve paid for educational expenses, you may be entitled to the American Opportunity or Lifetime Learning Credits. (Check out this quick quiz from the IRS, which will tell you if you’re qualified in just 10 minutes.)
Earned Income Tax Credit: Low- to moderate-income workers may be eligible to claim the Earned Income Tax Credit, one of the federal government’s largest refundable tax credits. You could be eligible for up to $7,830 in federal income tax credits, though the exact amount depends on your income, marital status and number of qualified dependents.
You can also qualify as a single person with no dependents if your AGI is below $63,398 in 2024. (College students and retirees with part-time jobs — we’re looking at you.) For details, check out the IRS’ Earned Income Tax Credit fact sheet.
Saver’s Credit: If you’re a low- or middle-income worker, you can claim the Saver’s Credit by adding money to a 401(k) or IRA. The credit is worth up to $2,000 for single filers or $4,000 for married couples.
To be eligible, you need to be 18 or older, not be claimed as a dependent on someone else’s taxes and be out of school.
9. Adjust Your Withholdings
The W-4 tax form is one you give to your employer specifying how much of your wages should be withheld for taxes.
It might seem intuitive to keep your withholdings as low as possible to keep more of your paycheck. However, if you find you owe taxes in April, you might want to go in and tweak your withholding claim so you don’t run into the same problem each tax season.
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