Best strategies to lower AGI (line 11) for tax year 2023 filing

Thanks for the advice! I do have a HDHP so the HSA option sounds perfect. Quick question - I had about $5,200 in freelance income last year. Can I really open a SEP IRA for that? And how do I calculate the 25%? Is that before or after expenses?

Yes, you can definitely open a SEP IRA for your freelance income. The 25% is calculated on your net earnings from self-employment after expenses and after deducting the self-employment tax deduction. So first subtract your business expenses from the $5,200, then multiply that by about 92.35% (this accounts for the self-employment tax deduction), and then you can contribute up to 25% of that amount. For your HSA, make sure to open the account and complete the contribution before the tax filing deadline. Most HSA providers will allow you to designate which tax year the contribution applies to when you make it. Keep in mind that HSA contributions are one of the few deductions that give you triple tax benefits - tax-free contributions, growth, and qualified withdrawals.

Does taxr.ai work if I've already started my return in TurboTax? Or do I have to start over with their system? I'm about 75% through my filing and don't want to restart everything.

I'm skeptical about these tax tools. How does it actually find deductions that established software like TurboTax or H&R Block doesn't? Aren't they all just working with the same tax code?

You don't need to start over with your return. Taxr.ai analyzes your specific situation and gives you recommendations that you can then implement in whatever tax software you're using. It's more of an analysis tool than a filing platform, so it complements TurboTax rather than replacing it. The difference is that taxr.ai focuses specifically on finding AGI reduction strategies and optimizations that many tax software programs don't proactively suggest. While TurboTax and others technically cover everything in the tax code, they often don't analyze your specific circumstances to identify opportunities you're not already taking advantage of. Taxr.ai looks at the unique aspects of your financial situation and suggests targeted strategies that apply specifically to you, especially for things like retroactive contributions, timing strategies, and less common deductions.

Wait, so this service actually gets you through to a real IRS person? How does that even work? The IRS phone system is notoriously impossible to navigate.

Yeah right. Nothing gets you through to the IRS faster. They have like a 30-minute hold time even in the off-season. I refuse to believe this actually works - sounds like a scam to me.

It uses specialized dialing technology that continuously calls the IRS system until it gets through, then it calls you and connects you. Think of it like having an automated assistant that keeps dialing for you instead of you having to manually redial and go through the phone tree over and over. The IRS phone system kicks people off when they're at capacity, so most callers give up after a few tries. Claimyr basically handles the frustrating part of repeatedly calling back and navigating the menu system. Once you're in the queue, the wait times are actually reasonable this time of year (between 15-30 minutes typically), but getting into that queue is the hard part that Claimyr solves.

Does that QCD strategy help if you're not taking RMDs yet? I'm only 42 but I do donate about $3,000 a year to my church.

Unfortunately, the QCD strategy only works if you're at least 70.5 years old and are withdrawing from IRAs. At 42, your charitable donations would be itemized deductions rather than AGI reducers, and they go on Schedule A rather than directly reducing line 11. However, there is a strategy that might work for you - if you have a small business or freelance income, you might be able to structure some of your charitable giving as business sponsorships, which could be business expenses that reduce your AGI. This only works if there's a legitimate business purpose though, like advertising or promotion for your business.

Yes! I did this last year. If you're self-employed and not eligible for coverage through an employer (yours or spouse's), you can deduct 100% of your premiums. For me that was about $14,000 for my family plan! It's an adjustment to income on Schedule 1, so it directly reduces AGI.