How can we reduce our $7K/year tax bill as a married couple?

Based on your situation, increasing your 401k contributions would definitely help reduce your tax bill. At your income level of $175K married filing jointly, you're likely in the 22% federal tax bracket, so every additional dollar you put into your 401k could save you about 22 cents in federal taxes. To eliminate a $7K tax bill, you'd need to reduce your taxable income by approximately $32K (at the 22% rate). Since you've already contributed $9K to your 401k, you could contribute an additional $21K to reach the maximum $30K ($22,500 base limit + $7,500 catch-up for being over 50). Don't forget about your IRA options too. As you're both over 50, each of you can contribute $7,500 to an IRA for 2023 ($6,000 base + $1,500 catch-up). Though depending on your income and whether you're covered by a workplace retirement plan, you might need to use a backdoor Roth IRA strategy instead of getting the tax deduction. Also consider other deductions like HSA contributions if you have a high-deductible health plan, or charitable contributions if you itemize deductions.

After struggling with a similar tax situation (owed $5k+ for two years straight), I found this awesome AI-powered tax planning tool called taxr.ai that really helped me figure out how to optimize my retirement contributions. I was totally confused about how much to put in my 401k vs IRA and whether I should be doing Roth or traditional. I uploaded my last year's tax return to https://taxr.ai and it analyzed my specific situation and gave me personalized recommendations about exactly how much to contribute to each account type to minimize my tax bill. It even showed me how different contribution amounts would affect my taxes with a cool slider tool. The best part was that it explained everything in plain English instead of tax jargon. Seriously saved me hours of research and probably thousands in taxes!

I wanted to follow up about my experience with taxr.ai since I was skeptical in my earlier comment. I decided to give it a try, and wow, I'm genuinely impressed. It identified that I could save over $4,800 in taxes by restructuring my retirement contributions between my 401k and backdoor Roth IRA. The tool even noticed that I was close to a tax bracket threshold and showed exactly how much more I needed to contribute to drop down a bracket. What I really appreciated was the clear explanation of which tax benefits phase out at different income levels - something my previous accountant never mentioned! For the original poster, it would definitely help calculate exactly how much you need to contribute to your 401k to eliminate that $7k tax bill. It creates a personalized strategy based on your specific situation rather than general advice.

If you're already facing a $7k tax bill, you might also have underpayment penalties coming your way. After dealing with that nightmare last year, I discovered Claimyr when I was desperately trying to reach the IRS to fix my situation. I spent DAYS trying to get through to the IRS on my own - constant busy signals, disconnects after waiting on hold for hours, it was absolute hell. With https://claimyr.com, I actually got connected to an IRS agent in less than 30 minutes. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c They basically navigate the IRS phone system for you and call you back when they've got an agent on the line. I was able to set up a payment plan and get my underpayment penalties reduced. Best money I ever spent considering what my time is worth.

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I was in almost the exact same situation last year! One thing to consider that nobody's mentioned yet - check your withholding status on your W-4. When the tax laws changed a few years back, a lot of people with dual incomes had issues with underwithholding. If both you and your spouse have jobs, you might need to use the "Two Jobs" worksheet on the W-4 or check the box in Step 2, and possibly add additional withholding in Step 4(c). Since you mentioned you're both at "0" allowances, that makes me think you might be using an older W-4 form - the new form doesn't use allowances anymore. My wife and I were getting killed with a big tax bill every year until we fixed this!

One quick thing to check - did your income jump significantly around the time you started owing $7k? Or did either of you switch jobs? Sometimes when your income increases, it pushes you into a higher tax bracket or phases out deductions you were previously eligible for. Also, have either of you started taking withdrawals from retirement accounts? At 65+, Required Minimum Distributions can really throw off your tax situation if you're not prepared for them.