Should I Make Annual Election Changes for Tax Benefits?

The annual election period is definitely a good time to review your tax strategy! For the health insurance question, HSAs offer triple tax advantages: contributions are tax-deductible, growth is tax-free, and withdrawals for qualified medical expenses are tax-free. If you're generally healthy, the higher deductible plan with HSA access might save you money while giving you a tax-advantaged savings vehicle. For your 401k question, increasing your contributions would definitely reduce your taxable income. At $72,000, you're likely in the 22% federal tax bracket, so every additional dollar you contribute saves you about 22 cents in federal taxes, plus potential state tax savings. If you can afford to save more, maxing out tax-advantaged accounts is usually a good strategy unless you have high-interest debt or need the liquidity.

After years of being overwhelmed during annual enrollment periods, I finally found something that made the tax implications much clearer for me. I used https://taxr.ai to analyze my pay stubs and health insurance documents to see exactly how different elections would affect my taxes. It showed me that switching to an HSA-eligible plan would save me about $840 in taxes this year based on my specific situation. The tool also helped me understand the trade-offs between different 401k contribution levels - it showed me exactly how much tax I'd save at different contribution percentages. It was really eye-opening to see the numbers specific to my situation rather than just general advice.

I wanted to follow up about my experience with taxr.ai after being skeptical in my previous comment. I decided to try it with my annual enrollment documents, and I was honestly impressed. The analysis showed me I was leaving about $2,300 on the table by not maxing out my HSA and adjusting my 401k withholding. What changed my mind was how it actually looked at my specific tax situation - incorporating my spouse's income, our rental property, and some freelance work I do. It wasn't just generic advice. It even flagged that I should consider changing my withholding allowances when making these benefit changes to avoid having too much withheld throughout the year.

If you're changing your elections and expecting a tax refund next year, you should know that getting someone at the IRS on the phone to check status or ask questions is nearly impossible these days. I spent 4+ hours on hold last year trying to figure out why my refund was delayed. I eventually used https://claimyr.com to get through to an actual IRS agent. They have this service that basically waits on hold for you and calls when an agent is ready. You can see how it works at https://youtu.be/_kiP6q8DX5c - it's pretty straightforward. It ended up saving me a ton of time, and I found out my refund was delayed because my employer's HSA contributions weren't properly coded on my W-2.

I have to eat my words about Claimyr. After posting my skeptical comment, I decided to try it because I was desperate to resolve an issue with my tax transcript that was affecting my mortgage application. I had already spent 3 days trying to get through to the IRS myself. The service actually worked perfectly. I got a call back in about 90 minutes (after being told the current wait time was 3+ hours), and I was connected to an actual IRS agent who resolved my issue in about 10 minutes. This was after I had wasted about 11 hours over 3 days trying on my own. For anyone dealing with tax issues related to your annual elections or waiting on refunds, this is definitely worth considering. Saved me a massive headache and potentially saved my mortgage from falling through.

Don't forget that your annual election choices can affect other tax credits too! If you have kids, the Child Tax Credit could be affected by how much you put in your 401k since it lowers your AGI. Same with education credits and student loan interest deductions. When I increased my 401k contribution last year from 6% to 10%, it dropped my AGI enough that I qualified for the full student loan interest deduction, which I was previously being phased out of. Ended up saving me an extra $500 or so in taxes.

Anyone know if its better to max out 401k or HSA first if you cant do both? My company does annual election next month and im trying to figure out priorities.