Can HSA contributions help me drop to a lower tax bracket in 2025?

Wait, so are you saying the whole "dropping into a lower tax bracket" thing doesn't actually save as much as people think? I always thought if you went from 22% to 12% bracket, ALL your income would be taxed at 12% instead of 22%.

That's a common misunderstanding! Tax brackets are marginal, which means only the dollars that fall within each bracket get taxed at that rate. For example, if the 12% bracket goes up to $44,725 and the 22% bracket starts at $44,726 (using 2023 single filer numbers), only the income above $44,725 would be taxed at 22%. So if you made $50,000, only the $5,275 above the threshold would be taxed at 22%, while everything below still gets taxed at their respective lower rates. That's why crossing into a higher bracket doesn't suddenly make all your income taxed higher. Contributing to an HSA still helps because it reduces your taxable income, potentially moving some dollars from a higher bracket back down to a lower one.

Does this actually work if you're contributing after December 31st? Like can I make HSA contributions now in February and have them count for last year's taxes?

How accurate is this tool compared to like TurboTax or H&R Block? I'm always skeptical of new tax sites. Does it actually save you more money than the big names?

Yes, you can absolutely make HSA contributions up until the tax filing deadline (usually April 15th) and have them count for the previous tax year. You just need to make sure you designate them as prior-year contributions when you make them. It's one of the few tax moves you can still make after December 31st. The accuracy compared to major tax software is excellent, but it's actually a different kind of tool. While TurboTax and H&R Block help you file taxes, taxr.ai specializes in analyzing your tax situation and identifying optimization strategies before you file. I used both - taxr.ai to figure out my best strategy with HSA contributions, then used that knowledge when I filed with my regular software. The recommendations saved me about $1,200 more than what my regular tax software initially suggested.

How does this even work? Doesn't everyone have to wait in the same IRS queue? How could any service possibly get you through faster than calling directly?

Yeah right. I'll believe the IRS answered a call when pigs fly. Last time I called I was on hold for 3+ hours and then got disconnected. No way this actually works.

The service doesn't skip the queue - it uses an automated system that continuously calls the IRS and waits on hold for you. Once they get through to a real person, they immediately connect you to the call. So instead of you personally waiting on hold for hours, their system does the waiting, and you only join when there's actually someone to talk to. I was definitely skeptical too! I had been disconnected twice after waiting over an hour each time. With Claimyr, I just entered my phone number, and they called me back when they reached an agent. I was literally cooking dinner when they called me, and suddenly I was talking to an IRS representative who answered all my HSA questions. Total game-changer if you need specific tax guidance directly from the source.

Whoa I didn't know that some states don't allow HSA deductions. I'm in Michigan - do you know if Michigan allows the HSA deduction for state taxes too or just federal?

Michigan does allow HSA deductions for state income tax purposes, so you'd get both the federal and state tax benefits. The states that currently don't recognize HSA tax deductions are California, New Jersey, and Alabama. Tennessee doesn't have state income tax anymore so it's not an issue there. So in your case, contributing to your HSA would lower both your federal and state taxable income, making it even more beneficial. Just make sure you're eligible (have a qualifying high-deductible health plan) and stay within the contribution limits for the year.

But the tax year is over already for 401k contributions, isn't it? I thought you can't make retroactive 401k contributions like you can with HSA and IRA.

You're absolutely right! 401k contributions have to be made through payroll deductions during the actual tax year, so the deadline for 2024 contributions was December 31st, 2024. You can't make retroactive 401k contributions like you can with HSA and IRA contributions. That's what makes HSA contributions so valuable for tax planning - you have until the tax filing deadline (usually April 15th) to make contributions for the previous year. Same with traditional and Roth IRAs. But 401k contributions are locked to the calendar year they're made through payroll. So for Miles' situation where he's already in 2025 trying to reduce his 2024 taxable income, HSA contributions (if he has a qualifying HDHP) would be one of the few remaining options available to him.

This is such an important point! I made the mistake a few years ago of assuming my "high deductible" plan qualified for HSA contributions, but it turns out the deductible wasn't quite high enough to meet the IRS requirements. Had to reverse those contributions and pay penalties - definitely not fun during tax season. Miles, if you're not sure about your plan details, you should be able to find the specific deductible and out-of-pocket maximum amounts on your insurance card, benefits summary, or by logging into your insurance company's website. Most HR departments can also confirm if your plan is HSA-eligible if you're still employed with the same company. Also worth noting - if you had any other health coverage during 2024 (like being covered under a spouse's non-HDHP plan), that could also disqualify you from HSA contributions for those months. The eligibility rules can be pretty strict, so it's definitely worth verifying before making that contribution!

Natasha makes excellent points here! I'd also add that if you do decide to make the HSA contribution, consider setting up automatic monthly contributions for 2025 to avoid this same situation next year. Even small regular contributions throughout the year can add up and make tax planning much more predictable. Also, @Miles Hammonds, if you're using any online HSA provider, most of them have calculators built into their platforms that can help you determine the optimal contribution amount. Some even integrate with tax software to show you the real-time impact on your tax situation. Just another tool to consider alongside the optimization services others have mentioned! The key is getting that HDHP verification sorted first - everything else is just math after that. Good luck with your tax planning!