As the new year and tax season are upon us, now is a great time to do a financial check-up to ensure you are taking advantage of the tax-deferring opportunities available to you.
“Anything you can do to tax-defer helps stretch your dollar,” said Shannon Edwards, UFHR Benefits director. “The first thing I tell people who come to me for savings advice is to do a financial check-up at the beginning of each year to ensure they are taking advantage of every opportunity.”
As a UF employee, you have a few ways to tax-defer your earnings.
New tax law repeals “parking tax”
A recent act of Congress repealed a “parking tax” enacted in 2017. As a result, UF parking decal deductions will return to a pre-tax basis beginning in February. This change will result in tax savings for both employees and UF. To learn more, please see the administrative memo announcing this change.
Check your W-4 allowances
Many of us claim a certain number of allowances when we are hired and never go back to change that number even though our lives might have changed. When you get married, have a child or your children become independent, for example, the number of allowances you claim will drive the amount of taxes you have withheld from your paycheck. The fewer allowances you claim, the more taxes will be withheld. Conversely, the greater number of allowances will cause fewer taxes to be withheld.
In order to see how many allowances you currently are claiming, log in to myUFL and navigate to Main Menu > My Self Service > Payroll and Compensation > W-4 tax information. You can change your W-4 anytime your tax situation changes and you choose to have more or less tax withheld.
Maximize your retirement contributions
UF faculty and staff are fortunate to have two tax-deferred voluntary retirement savings plans available to them. You might want to consider contributing additional money into a 403(b) plan or a 457 deferred compensation plan. Additionally, an After-Tax Roth 403(b) plan is available, offering participants the ability to pay taxes as contributions are made and to take tax-free qualified distributions.
During calendar year 2020, employees may tax defer up to $19,500, or $26,000 if over the age of 50, into these voluntary retirement plans. Enrollment in the voluntary plans can occur throughout the year, and more information can be found at https://benefits.hr.ufl.edu/retirement/voluntary/.
HDHP participants: Contribute to a health savings account
If you are currently enrolled in the State of Florida’s High Deductible Health Plan (HDHP), make sure you are taking advantage of contributing into a health savings account. Employees enrolled in the HDHP receive monthly contributions from the state into their HSA — $41.66 per month for individual coverage and $83.33 per month for family coverage.
However, enrollees also are able to contribute additional money into these accounts. Not only is this a great way to save for your qualified medical expenses, this amount is withheld on a pre-tax basis and rolls over year after year. There is even the option to invest these funds into self-directed mutual fund investments. If you are not currently contributing into your HSA or you want to change your amount, the IRS allows you to do this at any time during the year, unlike flexible spending accounts. In order to make a change, call the State of Florida’s People First Service Center at 866-663-4735.
If you have questions about these options or would like more information, you can schedule an appointment online to speak to a UF benefits counselor or contact UFHR Benefits at (352) 392-2477 or firstname.lastname@example.org.