W2 employee, lowering taxable income

Options

I'm a W2 Employee and work at a startup. The startup recently had an exit event and everyone in the company had a "cashless exercise" of all of the vested options. The proceeds of that cashless exercise come via a regular paycheck and are thus subject to regular income taxes.

Besides maxing out 401K, HSA, FSA, are there any other options available to me to help me reduce my taxable income for this year, to lower my tax burden as much as possible? Important to note that I only have the remaining days in December 2023 to do something so buying a home and deducting the interest is out of the question.

Answers

  • LaurenW
    LaurenW FreeTaxUSA Agent
    Options

    Hi xanon909!

    The options you mentioned are great ideas for helping to reduce your taxable income.

    If you are planning on itemizing your deductions, charitable contributions are a great way to lower your taxable income. If you had a significant amount of medical expenses this year, then you could enter them into the "Deductions/Credits" section. However, medical expenses are only deductible on your federal tax return if they exceed 7.5% of your Adjusted Gross Income.

    Make sure to go through the "Refund Maximizer" on our site, after you have entered all of your information, as there may be additional credits available that would lower your taxable income or taxes owed.