This is intended to be short and punchy–on purpose (smile!).

As a certified financial planner that has been in financial services for nearly two decades this is like second-nature to me, however, I come across clients all the time where these two tips allow them to save thousands in taxes.  So here we go…

  1. Ditch the FSA for the HSA

Often used but not as “flexible” as the name implies, FSAs (flexible spending accounts) allow you to use pre-tax dollars on dependent and medical care.  The major downfall is the funds don’t roll over year to year.  However, did you realize that the HSA (health savings account) gives you more bang for your buck? The HSA is available when you opt-in to your employers High Deductible Health Plan and allows you to save pre-tax dollars in an account that grows tax-free with tax-free distributions (used for medical expenses).  You essentially can have your own long-term care plan free to you when you need the cash.  For a couple over 55 years of age, they can be reducing their taxable income by an additional $7,750/yr

2. Contribute beyond the Employer Match

Regardless of your feelings, your 401(k) will likely be your largest wealth-building tool.  First, it is the direct product of your human capital and allows for one of the largest tax breaks you can receive dollar-for-dollar. Next, pre-tax salary deferrals into an employer plan like a 401(k) act as “above the line” deduction and therefore directly reduce the amount of taxes you pay.  The cap on your contribution for 2017 is $18,000 (not including what the employer matches or contributes through plan forfeitures, etc.).  It’s there as a deduction so use it.

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