There’s still time to make smart moves that could generate significant tax savings before the filing deadline. While most of the changes under Trump’s Tax Plan went into effect during his first term, it’s worth double-checking all tax policies to ensure you yield the highest savings possible during tax season.
Before finalizing your tax return or submitting documents to your CPA, make sure these items are on your final checklist. A quick review can ensure accurate filing and documentation to maximize your tax savings.
1. Itemizing Deductions for Investment-Related Expenses
Many itemized deductions were restructured or eliminated by the Tax Cuts and Jobs Act (TCJA) in 2017. If itemizing deductions still work to your benefit when filing taxes, remember that many investment-related expenses can be deducted when they exceed 2% of your adjusted gross income.
These deductible expenses include investment advisory fees, accounting services, safe deposit box rentals, investment newsletter subscriptions, online financial service fees, home computer costs for investment purposes, financial planning fees, and charges from brokers or banks for collecting investment income.
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2. Maximize The Right Kind of IRA Contributions
You have until April 15, 2025, to contribute to your Traditional or Roth IRA for the 2024 tax year. The maximum contribution is $7,000, with an extra $1,000 allowed if you’re 50 or older.
Traditional IRA contributions may reduce your taxable income, potentially lowering your tax bracket. Traditional IRA contributions offer immediate tax advantages by lowering your AGI and potentially your tax bracket. In contrast, Roth IRA contributions are made with after-tax dollars and provide tax-free withdrawals in retirement.
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3. Interest Paid on Home Equity & HELOCs
Did you use a home equity loan or HELOC to substantially improve the home that secures the loan? This rule applies equally to first mortgages, second mortgages, and refinance loans, allowing homeowners to potentially claim these interest payments as itemized deductions on their tax returns.
There are limits on how much mortgage debt can qualify for the interest deduction – across all home loans, you can only deduct interest on up to $750,000 of qualified mortgage debt ($375,000 if married filing separately). If you’ll be selling the home shortly, and the proceeds are subject to capital gains taxes, maintain detailed records of capital improvements for additional tax savings after the sale.
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4. Review Your Medical Expenses Carefully
Medical expenses that exceed 7.5% of your adjusted gross income can be deducted from your federal tax return, though some states offer more generous thresholds. The 7.5% threshold represents a more favorable rate for taxpayers, as it was lowered from 10% through legislative changes in late 2019.
You can’t deduct costs covered by insurance or paid using funds from a Flexible Spending Account (FSA). For example, if your adjusted gross income is $60,000 and you purchase hearing aids for $5,000, you could deduct $500 since it exceeds the 7.5% threshold of $4,500.
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5. Double Check Your Filing Status
Your tax filing status doesn’t need to apply to the entire tax year—it’s based on your situation as of December 31, giving taxpayers some flexibility in optimizing their tax position based on life changes throughout the year.
Choosing the correct status affects everything from your standard deduction amount and tax bracket to your eligibility for various tax credits and deductions; double-check with your CPA before you check that box.
The IRS recognizes five distinct filing statuses—single, Married Filing Jointly, Married Filing Separately, Head of Household, and Qualifying Widow(er)—determined by factors like marital status, dependents, and household responsibilities. Making the wrong choice can lead to missed tax breaks or even trigger IRS scrutiny, as filing status errors are among the most common tax filing mistakes.
Take Action Before Tax Day
Understanding these tax strategies can help you make informed decisions before tax filing. Consider consulting with a tax professional to identify which approaches best suit your situation. Taking action now might lead to significant savings on your tax bill.
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