Enter a search term.
line drawing document and pencil

File a claim

Need to file an insurance claim? We’ll make the process as supportive, simple and swift as possible.

Action Teams

If you want to make an impact in your community but aren't sure where to begin, we're here to help.
Illustration of stairs and arrow pointing upward

Contact support

Can’t find what you’re looking for? Need to discuss a complex question? Let us know—we’re happy to help.
Use the search bar above to find information throughout our website. Or choose a topic you want to learn more about.

3 ways to be more tax-efficient year-round

Illustration of people holding a large watering can over  a plant

It’s easy to avoid thinking about your income taxes until just before the April deadline. In fact, according to the Internal Revenue Service, 20-25% of all Americans wait until the last two weeks before the deadline to prepare their tax returns. Common reasons filers procrastinate are because they are too busy, or they just plain forgot. An effective way to not delay the inevitable and help reduce the stress of filing taxes is to do what you can throughout the year to minimize what you’ll owe.

Including tax efficiency as part of your financial strategy might be easier than you think. And it's an important topic to understand. The Thrivent Retirement Readiness Survey1 found that the most valuable piece of advice people would have given their younger selves would be to learn about tax implications for their retirement savings.

Consider these three ways to help stay tax efficient before you file in the spring.

1. Save more for retirement by maximizing contributions.

Investing for your future retirement goals can help benefit you at tax time every year. Contributions to the following qualified retirement accounts have distinct tax benefits.

Employer sponsored retirement plans: 401(k)s, 403(b)s & 457(b)s

Your contributions to a 401(k), 403(b)or a similar salary deferral employer-sponsored retirement plan are great ways to be tax-efficient while saving for your future. The traditional version of these accounts are "tax-later accounts", meaning your contributions reduce your taxable income during the year by that amount. Instead, your tax liability will occur once you withdraw funds. 

  • 2023 contribution limit: $22,500
  • 2024 contribution limit: $23,000

As an additional boost to retirement savings, catch-up contributions are available if you are 50 or older.

  • Catch-up limit: $7,500

Roth versions of 401(k)s & other employer-sponsored retirement plans

Your employer also may offer a Roth version of their retirement plan, like Roth 401(k), Roth 403(b) or a Roth 457(b). It works much like the traditional versions of the plans in that it's funded with contributions from your paycheck and offers a pre-selected list of investment options. The annual contribution limits are also the same.

Where Roth accounts differ from traditional plans, which are funded with pre-tax dollars, the contributions made to Roth accounts already have been taxed so no additional tax liability will be incurred when you make qualified distributions down the road.

A Roth account may be most appropriate if you believe you are not yet in your peak earning years and you may be in a higher tax bracket in retirement.

Individual retirement accounts (IRAs)

IRAs offer a way to invest outside of your employer's plan. While the contribution limits are lower than employer plans, both traditional and Roth IRAs offer tax benefits. You have until the federal tax filing deadline of April 15 to make contributions to traditional and Roth IRAs for the previous year.

  • 2023 contribution limit: $6,500
  • 2024 contribution limit: $7,000
  • Catch-up limit: $1,000

Let's explore the differences between a traditional and Roth IRA.

Traditional IRAs

You typically are able to take a tax deduction for contributions to a traditional individual retirement account (IRA). However, if you or your spouse participate in an employer-sponsored retirement plan you must meet the income thresholds in order to take advantage of the tax deduction.3

Roth IRAs

While there is no tax deduction for Roth IRA contributions, if you meet the Roth IRA income threshold, all future earnings grow tax-deferred and distributions you take after age 59½ will be tax-free as long as it’s been at least five years since your first contribution.2

Roth IRA income limits:

  • If you make between the maximum MAGI listed, you can contribute but it will be a reduced amount.
  • If you make equal to or more than the maximum limit listed, you can't contribute anything to a Roth IRA. (If this applies to you, check out these alternatives.)

Filing status
2023 maximum modified adjusted gross income (MAGI) to contribute to a Roth IRA
2024 maximum modified adjusted gross income (MAGI) to contribute to a Roth IRA
Single or head of household
Married filing jointly
Married filing separately

2. If you’re raising kids, look for child tax credits & college savings plans.

Raising a family is both priceless and expensive. Here are two options that can help you financially.

Child tax credit

The Child Tax Credit is meant to help families with qualifying children get a tax break.

It’s a tax credit, which means it reduces your taxes due on a dollar-for-dollar basis. However, there are income thresholds above which the credit begins to phase out.

  • For the 2023 tax year, the credit provides of maximum of $2,000, with $1,600 potentially being refundable, per qualifying dependent child under age 16.
  • For the 2024 tax year, the credit provides the same $2,000 max with $1,700 potentially being refundable.

To qualify, income thresholds for single taxpayers and heads of household are $200,000 ($400,000 for joint filers). If your modified adjusted gross income is over the limit, your credit gets reduced by $50 for each $1,000 that your income exceeds the threshold.

529 educational savings plan

If you’re planning to help your children with education expenses, a 529 education savings plan may be a tax-efficient option.4

These college savings plans are sponsored by states and let you set up an investment account to either prepay tuition costs at eligible colleges and universities or make after-tax contributions that grow tax-deferred. Any earnings on the investments are not taxable if the funds are used for qualified educational expenses.

While you cannot deduct contributions to 529 plans on your federal income taxes, most states with an income tax allow residents to deduct a portion of their contributions or receive a tax credit.


Are your tax liabilities diversified?

Investing in a variety of tax-advantaged accounts helps minimize how you’re taxed on those accounts now and in the future. Explore how to work tax-efficiency into your financial strategy.

Let's go

3. Consider the advantages of health savings or flexible spending accounts.

If you have access to a flexible spending account (FSA) or health savings account (HSA), they are both tax-efficient ways to help you manage the rising cost of healthcare.

Both can reduce your taxable income for the year and be used to pay for qualifying medical, dental and other eligible healthcare costs. But be aware of their differences.

Flexible spending account (FSA)

If your employer offers FSAs, your contributions are typically made through payroll deduction on a pre-tax basis, which reduces your taxable income. However, the account does not belong to you. If you leave your job or don’t use the funds during the year, you lose the money—unless your employer allows some carryover.

In 2024, you can contribute up to $3,200 to an FSA.

Health savings account

To qualify for an HSA, you need to have a high deductible health insurance plan. You can make contributions until April 15 for the previous tax year, and any funds you contribute up to the annual limit are yours if you leave your employer and carry over from year to year. Any earnings grow tax-free.

In 2024, you can contribute up to $4,150 for yourself, or $8,300 for your family.

Be mindful of the contribution limits and withdrawals for eligible expenses for FSAs and HSAs, or you could face tax penalties or forfeit unused funds.5

Get help with a tax-efficient financial plan

A financial advisor can help you create a plan to help you be more income-tax-efficient and potentially increase your total spendable income when you need it most. While Thrivent advisors do not provide specific legal or tax advice, they can partner with you and your tax professional or attorney.

1Methodology: This research was conducted in June 2022 among a national sample of 1,500 adults in order to measure their sentiments, financial planning, knowledge, and issues regarding retirement. The interviews were conducted online and the data was broken into three sample groups; Saving, Nearing, and Retired. Results from the full survey have a margin of error of plus or minus 3 percentage points.

2 Distributions of earnings are tax-free as long as your Roth IRA, Roth 403(b) or Roth 401(k) is at least five years old and one of the following requirements is met: (1) you are at least age 59½; (2) you are disabled; (3) you are purchasing your first home ($10,000 lifetime maximum); or (4) the money is being paid to a beneficiary.

3 For 2023, your contribution deduction is reduced if MAGI is between $73,000 and $83,000 on a single return and $116,000 and $136,000 on a joint return. If you're married filing jointly and an active participant in an employer sponsored retirement plan and your spouse is not, the deduction for your spouse's contribution is phased out if MAGI is between $218,000 and $228,000. For 2024, your contribution deduction is reduced if MAGI is between $77,000 and $87,000 on a single return and $123,000 and $143,000 on a joint return. If you're married filing jointly and an active participant in an employer sponsored retirement plan and your spouse is not, the deduction for your spouse's contribution is phased out if MAGI is between $230,000 and $240,000. If you're a married taxpayer who files separately, consult your tax advisor.

4 Offered through a brokerage arrangement with Thrivent Investment Management Inc. 529 college savings plans are not guaranteed or insured by the FDIC and may lose value. Consider the investment objectives, risks, charges and expenses associated before investing. Read the issuers official statement carefully for additional information before investing. Investigate possible tax benefits that may be available based on the state sponsor of the plan, the residency of the account owner, and the account beneficiary. Consult with a tax professional to analyze all tax implications prior to investing.

5 Withdrawal taken to pay for non-qualified expenses will incur a 20% penalty.

Thrivent and its financial professionals do not provide legal, accounting or tax advice. Consult your attorney or tax professional.