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Christine A. Centeno, CFP, MS

Simplicity Wealth Management, LLC

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  • Christine Centeno, CFPⓇ

Getting the Most Bang for Your Buck: Three Strategies You Can Implement Now to Save on Taxes






Taxes, yuck! We’re coming up on that time of year when many of you are faced with stroking a large check to the IRS. If you’re left with a feeling of regret and wondering if you could have done more, read on.


It’s time to get smart about how and where you’re saving. It can make a big impact at tax time. These three simple strategies will get you headed in the right direction and help keep more dollars in your pocket.


1. Contribute to your 401(k) or other Employer Retirement Plans


This is one of the most powerful (and often underutilized) strategies. In 2019, the IRS allows you to contribute up to $19,000 into your Employer Retirement Plan. If you’re over 50, that limit increases to $25,000 per year. These limits do not include what your employer contributes on your behalf. Here’s what’s so powerful about this- it’s a dollar-for-dollar tax deduction (the best kind). What does that mean? If you contribute before-tax dollars to your 401(k) or other Employer Retirement Plan, you don’t pay income tax on this amount. A married couple under 50 can defer up to a combined $38,000 of income per year. If you’re over 50, that increases to a combined $50,000 per year. These are pretty significant numbers and can make a large impact come tax time.

For those of you who are lucky enough to have access to other Employer Retirement Plans, such as a 457 or a 403(b), you may be able to defer even more dollars into these plans.

2. Contribute to a Health Savings Account (HSA), Flexible Spending Account (FSA), or Dependent Care FSA.


These accounts allow you to save for health care and dependent care related expenses in a tax-preferred way. All three offer the same dollar-for-dollar tax deduction as retirement plan contributions, although the IRS limits are significantly lower for these accounts. For the HSA and FSA, the type of account available to you depends on your health insurance plan and your employer benefits.


  • Health Savings Accounts are available to participants of high deductible health insurance plans who obtain their insurance through an employer or via the Marketplace. In 2019, the IRS allows a contribution of $3,500 for individuals, $7,000 for families and an additional $1,000 catch-up contribution for those over age 55 into an HSA. The dollars saved into an HSA are contributed (if done through your employer) to your account before you pay taxes on them. If used for qualified health care expenses, the distribution is tax-free. If you invest the funds within your HSA, the growth is also tax-free. In other words, triple tax-free. If you purchase your health care insurance from the Marketplace (Healthcare.gov), plans will indicate if they are “HSA-eligible”. Contributions will be made with after-tax dollars, but you will qualify for a deduction when filing your taxes. In this case, you will also need to open your own HSA. HSA Bank is a great place to start. Here’s the nice thing about HSAs, if not used immediately for health care expenses, they can become a very tax-efficient long-term savings vehicle that can help you pay for medical expenses in retirement. There is no requirement to use funds within a certain time period. For more information on eligibility, additional benefits and qualified expenses visit the Healthcare.gov HSA specific page.


  • Flexible Spending Accounts are offered by employers and come with a few more strings attached. Think of these accounts from more of a use it or lose it perspective. The IRS currently lets you contribute up to $2,700 into an FSA (per employer). If both you and your spouse have FSAs available at your employers, you can contribute $5,400 total. Just like HSA accounts, FSA accounts can be used for eligible health care expenses. Funds are contributed before tax, and if used for qualified expenses are withdrawn tax-free. Generally, any funds contributed must be used within the plan year. Some employers may offer a grace period. For more information on your employer’s specific policy, contact your HR Department. For more information on eligibility, additional benefits and qualified expenses visit the Healthcare.gov FSA specific page.


  • Dependent Care Flexible Spending Accounts These accounts are also offered by employers. Up to $5,000 can be contributed to a Dependent Care FSA. These funds can be used for dependent care expenses such as daycare, summer camp, and even adult daycare. They must be used for a dependent of yours that is under the age of 13 or disabled. Just like the FSA, funds contributed must be used within the plan year. Some employers may offer a grace period. For more information on your employer’s specific policy, contact your HR Department. Dependent Care FSA can be particularly impactful for those who make too much to qualify for the dependent care tax deduction. Meaning, no matter how much you make, if your employer offers a Dedependent Care FSA, you can contribute to it. Review IRS publication 503 for more details on eligibility, additional benefits, and qualified expenses.


3. Make IRA Contributions


If you’ve utilized all the options above, and still have extra dollars to save, you may want to consider making IRA contributions. For those Married Filing Jointly and making up to $123,000 combined IRA contributions are deductible. In cases where one spouse does not work or have access to a retirement plan at work, this limit is even higher (up to $203,000). In 2019, the contribution limits are $6,000 per person with a $1,000 additional catch-up contribution for those over age 50.

This deduction is not as powerful and the dollar-for-dollar deductions discussed above. Here’s how it works, if you’re in the 24% tax bracket and save $6,000 into your IRA, you can save up to 24% of your contribution, or $1,440 in taxes.



These strategies are a great starting point. There are many different options and types of accounts that can help you save on taxes. In fact, the number of options can be overwhelming. For more in-depth strategies, I recommend working with a financial planner to help you determine the most effective tax-efficient investing, saving, and withdrawal strategies tailored towards your specific financial situation and goals. A good planner can help you to identify the best type(s) of accounts for you to use to maximize tax savings and help with both short-term and long-term tax planning strategies.



Read more about my firm, and check out my service options.


Christine Centeno, CFPⓇ, MS is the founder of Simplicity Wealth Management. She has over 11 years of industry experience as a financial advisor and is a member of several professional organizations including NAPFA, FPA, and the XY Planning Network. She has her Masters in Financial Planning. In 2019, after years of working for large firms, she founded her own firm. Simplicity Wealth Management provides clarity to the complicated nature of financial planning and investing by delivering comprehensive advice without hidden fees and unnecessary jargon that leaves you in the dark. The goal is to deliver transparent, easy-to-understand guidance to help clients achieve their financial goals and remain informed every step of the way.

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