This past weekend, I filed my taxes. After climbing out from under a mountain of our 1099-DIVs and panic-emailing my CPA to get my 1099-NECs filed before the deadline (“PLEASE HELP ME”), I summited IRS Mountain and dejectedly planted my flag in the fertile soil of owing a multiple five-figure sum for the third straight year.
You might be wondering, then, why you’d ever take pointers from me—of underpayment fame!—about how to lower your tax bill, but who better to point you toward last-minute Hail Marys than a gal who passive-aggressively scheduled her obscenely high IRS direct withdrawal for the last possible moment on April 15?
If you, too, find yourself facing the “You owe a zillion dollars, lmao” notification of shame, check to make sure you’ve taken full advantage of your tax-deferred investment vehicles. They’re all legal ways to hold on to more of your own money, instead of forking it over.
Crucially, these vehicles allow contributions made this year—in 2024—to be characterized as though they were made last year, in 2023. At the risk of stating the painfully obvious: To take advantage of this, you have to have cash available to invest (whether that be from fresh income, savings, or somewhere else doesn’t really matter).
When you’re contributing to these investment accounts, they’re going to ask you which contribution year you’re electing. If you’re trying to ease your 2023 tax burden, be sure to select 2023—if you choose 2024, it’ll apply the contribution to next year’s tax calculation instead.
Our goal with using these accounts is to lower our taxable income and create more legitimate deductions.
The tried ’n true: Traditional IRA
If you (and/or your spouse) are not covered by employer retirement plans at work, you can still make 2023 contributions to your Traditional IRAs. In 2023, the contribution limit for an IRA was $6,500 per person, so keep in mind that if you’ve already contributed the maximum to a Roth IRA for 2023, you’re out of luck—the Traditional IRA can’t be your last-minute saving grace.
But if you aren’t covered by a plan at work (and neither is your spouse!) and you also haven’t contributed to any IRA for 2023 yet, you could theoretically contribute the full $6,500 and thereby deduct it from your taxable income. (The rules for couples in which one spouse is covered at work are described more fully in the web version of this article.)
If you’re in a Married Filing Jointly situation, you could theoretically defer (and deduct) $13,000 total by contributing the maximum to both individuals’ IRAs. If you’re in the 24% marginal tax bracket, that’s a direct savings of up to $3,120 on this year’s federal tax bill.
The HSA, our for-profit healthcare system’s consolation prize
If you have a high-deductible health plan (as defined by the IRS), you may be eligible for an HSA plan. The contributions and growth will be tax-free forever if you use the money for qualified medical expenses, so it’s a great place to rack up hella capital gains.
The contribution limits vary on HSA plans for the 2023 tax year: If your health insurance plan just covers you, the limit is $3,850, and if it covers your family, it’s $7,750.
You may already have an HSA set up through your work, or you may need to open one yourself. Once you surpass a certain amount of cash in the account (typically somewhere in the $1,000 to $2,000 range, but it varies by plan), you’re usually able to invest the funds—something you’ll do within your HSA account portal.
You’ll have to log into your HSA account and make a direct contribution (as opposed to a payroll contribution) of one big, fat lump sum, which is technically suboptimal because direct contributions aren’t exempt from FICA tax the same way payroll deductions are. The good news is, an HSA contribution made in 2024 for 2023 can be—that’s right, say it with me!—retroactively tax-deductible.
Moving forward, consider making your 2024 contributions through payroll deductions, because then they won’t be subject to the 7.65% FICA tax, either.
Depending on whether you’ve got a solo or family plan, someone in the 24% marginal tax bracket will save up to between $924 and $1,860 on their 2023 taxes.
Finally, the side hustler’s paradise: SEP IRA
If you have any self-employment income (read: 1099 income), this last-minute strategy might be for you.
A few things to note:
- If you have a business with full-time employees, the rules are a little different—but if you’re a solopreneur or side hustler, this is fairly straightforward.
- You can contribute to a SEP IRA even if you’re also covered by, say, a 401(k) at a W-2 employer, since they’re accounts funded by two different sources of income.
The TL;DR on the SEP IRA is that solopreneurs can contribute up to around 20% of their net business income, up to a whopping $66,000 for 2023. (If you want to calculate a super precise contribution, you can always pay a CPA to do it for you.)
For example, if your side hustle earned $15,000 in 1099 income and you’re writing off $3,000 in expenses, you have approximately $12,000 in net business income. You’d multiply $12,000 by 20%: You can contribute around $2,400 to your SEP IRA.
For those with a lot of side hustle or self-employment income, this deduction can be quite significant.
This won’t work if (a) none of your income came from self-employment or side hustle-type sources or (b) you’ve already contributed the maximum to a Solo/Individual 401(k).
The redeeming quality of the SEP IRA for use in last-minute pinches like this one is that it can be opened and funded this year for last year, whereas things like Solo 401(k)s must be opened before December 31 of the tax year you’re making contributions for. (All that to say, if you already have a Solo 401(k), you can still make 2023 contributions.)
My only remaining watchout is to be wary of the SEP IRA if you typically do Backdoor Roth IRAs.
Sometimes, people opt for Solo 401(k)s instead for this reason. But if you’re down for a complicated workaround, you can open both a SEP IRA and a Solo 401(k) in 2024, fund the SEP IRA for 2023, and then—after you’ve filed and tax season is over—roll the funds over into your Solo 401(k) such that you have $0 balance in the SEP IRA again. Problem solved. Backdoor Roth IRA commence! (If reading that sentence felt like deciphering ancient hieroglyphics, check out the full post online for more details and resources.)
In summary, someone who’s not covered by a retirement plan at work, has side hustle income, and has a high-deductible health plan could theoretically use all three methods.
Talk about a triple tax whammy! (I hate myself.)
It’s worth restating: I’m not a licensed tax professional. Please consult your CPA and do your own research before making big money moves. Hopefully this serves as a starting point for your pre-tax investing game this tax season if you haven’t made any decisions yet, and may the pre-tax odds be ever in your favor.
Read the full breakdown online.
And as my guest, Samara Cohen, chief investment officer of BlackRock iShares, points out, it’s no coincidence that ETFs took off around the same time as commercial microchips—because you need a lot of computing power to process that many “buys” simultaneously. (In the historical sense, young people have a unique edge in this corner of the financial arena.)
But all ETFs are not created equal. Take expense ratios, for example, or the fees you’ll pay to own them: Even if you’re not working with an advisor or wealth manager who may charge fees, the funds themselves almost always charge something. This can range from something like 0.02% (extremely reasonable, practically free) to 0.5% (quite expensive; probably avoid).
So when you saddle up your buy orders and build your own diversified portfolio, you not only want to understand your fees, but what you’re buying (is it an index ETF tracking the S&P 500, or an active ETF containing only clean energy providers?). There are literally thousands of options, including the recently launched first-ever “Target Date Fund” ETFs that simplify your retirement investing.
Listen to this topical ’n timeless deep dive.
Invest + chill: Put your money to work from the comfort of your phone. Betterment’s 
