How Can I Save Money On Taxes As A Federal Employee?

By Bobby Maggi

Everyone does their taxes, but how many are doing it right? When we say that there’s a right or wrong way to handle taxes, we’re not just talking from a legal standpoint. There are ways to save money through tax-efficient practices, and we’re here to let you in on all of the best strategies. Make sure you’re getting the most out of your tax benefits as a federal employee when you schedule a consultation with Federal Educators!

Manage Your TSP Like a Pro (Or Leave It to the Pros)

Did you know that Thrift Savings Plan (TSP) contributions can reduce your taxable income? This is one of the best ways to save money on taxes, especially when you meet the maximum contribution limit each year. This also translates to a wealth of tax-free withdrawals by the time you retire. It’s a double-whammy of tax savings easily accessible to all federal government employees!

Look into the Federal Educators Thrift Savings Plan overview for more information about your entitled federal retirement benefits.

HSAs Are Tax-Deductible. Make the Most of It!

You know what else is tax-deductible? Health Savings Account (HSA) contributions. Almost all FERS employees qualify for an HSA, and these savings accounts offer tax-free growth and tax-free withdrawals! Chances are you’re going to be presented with medical bills during your retirement years. In that case, you have nothing to lose (but so much to gain) by getting started on an HSA that’ll no doubt come in handy later. Just like that, another great way to save money on taxes.

Don’t Forget Your Tax Credits! You Might Qualify For More Than You Think.

When some people think about tax credits, they think about the ones that are for niche groups like single mothers, those with disabilities, or military personnel. In reality, there’s a huge abundance of tax credits that you’re bound to qualify for at least one of them! If even one will help you save a bit of money on your taxes, then it’s worth looking into.

Here are some examples of common tax credits that you may qualify for:

Energy Efficient Home Improvement Credit
Earned Income Tax Credit (EITC)
Retirement Savings Contributions Credit (Saver’s Credit)
American Opportunity Tax Credit (AOTC)
Lifetime Learning Credit (LLC)
Child and Dependent Care Credit
Child Tax Credit (CTC)

An IRA Conversion Might Be Just What You Need For Tax Efficiency

Does your current federal employee retirement plan account for tax-free withdrawals? If not, then it might be time to consider transferring your funds to a qualifying savings account, like a Roth IRA. Tax-free withdrawals help you avoid higher tax rates at a later date (because who knows what inflation will do ten or thirty years from now?). Basically, you pay less taxes now to pay less taxes later. Now that’s saving money on taxes!

A Roth IRA conversion also frees you of having to make required minimum distributions (RMDs). This means that you can keep your savings account untouched for more tax-free growth.

Feeling Generous? Charitable Contributions Come With Tax Advantages

Federal employees aged seventy (and a half) or older can make tax-free charitable donations coming directly from their retirement savings accounts. For accounts that require RMDs, like an IRA, these Qualified Charitable Distributions (QCDs) can count towards your required minimum distribution. That’s two birds with one stone for efficient tax savings.

Ask Federal Educators For More Tips On Saving Money On Taxes!

Our team of retirement planners and tax professionals knows all of the best tips and tricks to help you save money on taxes. Schedule a consultation appointment today when you call (813) 568-1212 or look into our educational workshops for insights from industry experts!

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