The article below is up to date based on the latest tax laws. It is accurate for your 2019 and current 2018 taxes, which you will file by the April 2019 (or October 2019 with filed extension) deadline.
While we tend to focus on the amount in paychecks we get from our employers, did you know that there are several ways you can boost your pay?
You may have signed up for the essentials when you were first hired, but you may have missed on some huge money saving opportunities that can also help you come tax time. How? By maximizing all of the benefits you qualify for through your employer.
If you haven’t already, be sure to check to make sure you’re using as many benefits as you qualify for. While it might not be as clear-cut as a raise on paper, the extra cash you receive by taking advantage of benefits at your workplace may give your wallet a helpful boost!
Here are five employer-offered benefits that can save you a significant amount of money.
Let’s start with a big one – health insurance. As expensive as it can be (especially for families), there are ways you can win and save money.
First of all, some insurance plans reward healthy habits. Their plans may cover all or a portion of your gym membership, or some may have a program to reimburse you for healthy habits.
My friend’s health plan, for example, will pay for her walking 10,000 steps or hitting a milestone. Be sure to check and see if your insurance company offers something similar.
If you’re fairly healthy and pretty go to the doctor for your annual visits, then you can slash your premiums by switching to a high deductible health plan (HDHP), which more employers are offering. As the name suggests, the higher deductible means you’ll be on the hook for medical expenses until you reach it, but preventive visits are covered so you can come out ahead.
My husband and I were able to lower our premiums by $300/month by switching to a high deductible plan! Just make sure you review your past few years of health care to make sure the numbers work in your favor.
Health Savings Account
If you have a high deductible health plan through your employer, you can open up a health savings account. The contribution limit is $6900 for families and $3450 for single individuals.
Basically, pre-tax money is taken out of your check (lowering your taxable income) and placed into an account that you can use to pay for qualifying medical expenses.
The extra bonus with having a Health Savings Account is that you can withdraw the money tax-free as well. However, withdrawals that are not used to pay for medical or dental expenses are considered taxable income to you. Additionally, those individuals who are not disabled or over age 65, are subject to a 20% tax penalty.
Once you’ve saved up enough for your max out of pocket expenses, you can decide to invest future contributions, allowing your investments to grow tax-free.
Flexible Spending Account
Flexible spending accounts are similar to an HSA in the way you can set aside money in that account tax-free. Your account can be used to pay for expenses like deductibles, office visit co-pays, and prescriptions.
The big difference between a flexible spending account and a health savings account is that if you don’t use the money in your FSA, you’ll lose it.
For many, 401(k) hold the bulk of their retirement savings. They can be a fantastic way to contribute towards retirement and lower your taxable income.
One bonus that can really boost your portfolio is employer match. Typically an employer will put in a certain amount into your account, matching what you contribute.
You can contribute up to $19,000 in your 401(k) for 2019. If you’re aged 50 or over, you can qualify for a catch-up contribution limit of an additional $6,000.
With so many shifts with technology, some employers are offering tuition reimbursement to keep their employees up to date with their skills. Typically, employees can have tuition paid by the company if the course work or degree is relevant to their job.
You don’t want to be stuck with student loans, so make sure you check with your employer about which courses and certifications are covered as well as any required length of employment.
Your Take on Optimizing Benefits
Your employer may not offer all of these benefits, but even if you take advantage of the ones they do have available, you can find yourself with more money in your checking and savings.
Don’t worry about knowing these tax rules. TurboTax asks you simple questions and gives you the tax deductions and credits your eligible for based on your answers. If you have questions, you can connect live via one-way video to a TurboTax Live CPA or Enrolled Agent to get your tax questions answered. The TurboTax Live CPA or Enrolled Agent can even review, sign, or file your tax return.
I’d love to get your take – how are you using benefits offered at your job?