It’s Not Tax Season Yet — But These 4 Deductions Can Save You Big If You Act Now
Written by
Jamela Adam
Edited by
Levi Leidy
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Thinking about taxes while on your summer vacation doesn’t seem so fun, but if you’re required to pay quarterly estimated taxes, this time of year is an important checkpoint. The third quarter deadline is Sept. 30, which means there’s still time to reduce what you owe to Uncle Sam.
Here are a few deductions and contributions you should know about before summer ends.
Contribute To a SEP IRA If You’re Self-Employed
Freelancers, independent contractors and small business owners often overlook valuable retirement tax breaks by waiting until the last minute to contribute. A simplified employee pension (SEP) IRA lets you put away up to 25% of your net earnings from self-employment, up to a maximum of $70,000 for 2025.
What’s great about SEP IRAs is that your contributions are tax-deductible. In other words, your contributions directly reduce your taxable income, which will grow tax-deferred until you withdraw them in retirement.
Make Charitable Donations
Besides contributing to a SEP IRA, you could also donate to qualified charities to lower your taxable income for the year.
If you itemize deductions, you can typically deduct contributions made to qualifying organizations. That said, make sure you keep detailed records, including receipts or acknowledgment letters, so you won’t have issues claiming the deduction.
If you’re close to the threshold for itemizing, you might want to “bunch” your donations into this year to get the most benefit. This means making two years’ worth of donations in one tax year so you can itemize this year and take the standard deduction next year.
Max Out Your Health Savings Account (HSA)
Because contributions to HSAs are tax-deductible, your money will grow tax-free, and so will the withdrawals for qualified medical expenses.
For 2025, the contribution limits are $4,300 for individuals and $8,550 for families. If you’re 55 and older, you’re allowed an extra $1,000 catch-up contribution.
If you haven’t been contributing to your HSA, summer’s a good time to check your progress and consider adding more to reduce your taxable income. Just remember that you’ll need to be enrolled in a high-deductible health plan to contribute.
Use Your Flexible Spending Account (FSA) Before You Lose It
If you have a workplace FSA, check to see if it has a “use it or lose it” provision. Unlike HSAs, most FSAs require you to spend the money you’ve contributed within the plan year or risk forfeiting it.
Some employers offer a grace period or allow you to carry over a small portion into the next year, but the rules could differ. If your balance is higher than expected, consider using it on eligible expenses like prescription glasses, over-the-counter medications or dental work before it expires.
Though spending from an FSA won’t necessarily change your estimated tax payment for Q3, it could help you get the full benefit of the tax-free dollars you’ve already set aside.
Review Your Income and Adjust Your Payments
Before you send in your next estimated tax payment, take a moment to review your income so far this year. If business has slowed or sped up, you may need to adjust your Q3 payment to avoid underpaying or overpaying. You can use the IRS Form 1040-ES worksheet to estimate what you owe.
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