Tax season doesn’t have to deplete your savings or your sanity. Often, taxpayers overlook deductions that could save them significant amounts on their returns.
These seven tax deduction opportunities are easy to miss and could allow you to keep more money in your pocket.
Through careful planning and innovative use of these deductions, you may find that your tax bill is significantly reduced and your refund is increased.
Pro Tip: Invest with zero commissions! Start small with just $1 and diversify across stocks, bonds, ETFs, crypto, and art using this popular app - sign up today.
1. Double-dip with retirement savings tax breaks
Most taxpayers know the tax benefits of retirement contributions, but many overlook the full potential of these savings strategies.
In 2024, individuals could contribute up to $23,000 to workplace plans like 401(k)s ($30,500 for those 50+) and $7,000 to IRAs ($8,000 for those 50+). The Saver’s Credit adds another incentive, offering a tax credit of 10% to 50% on the first $2,000 ($4,000 for joint filers).
Pro Tip: The earlier you start saving, the more you gain. Take advantage of matched contributions and compounding interest with a SoFi IRA. The longer you wait, the more you leave on the table. Get started today.
INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE. Brokerage and Active investing products offered through SoFi Securities LLC, member FINRA(www.finra.org)/SIPC(www.sipc.org).
The probability of a member receiving $1,000 is 0.028%. If you don’t make a selection in 45 days, you’ll no longer qualify for the promo. Members must fund their account with a minimum of $50.00 to qualify. The probability percentage is subject to decrease. Members are only eligible for the Stock Award promotion upon opening their first brokerage account; subsequent cash brokerage accounts are ineligible for the promo, including for members with multiple accounts.
2. Stack education credits for more tax savings
Families often rely on the American Opportunity Tax Credit (AOTC) or the Lifetime Learning Credit (LLC) to reduce education costs, but it is possible to combine these credits effectively.
The AOTC offers up to $2,500 per student for the first four years of college, while the LLC provides up to $2,000 per tax return for post-secondary education.
Strategizing expenses among eligible family members allows you to benefit from both credits within the same tax year.
Pro Tip: Education tax credits are limited. Find ways to earn more by investing in real estate and venture capital. Companies like Fundrise offer investments as small as $10.
Note: This is a testimonial in partnership with Fundrise. We earn a commission from partner links on moneytalksnews.com. All opinions are our own.
3. Use Health Savings Accounts for triple tax benefits
Health Savings Accounts (HSAs) offer a powerful but often overlooked triple tax benefit. In 2024, individuals can contribute up to $4,150 ($8,300 for families), with an extra $1,000 for those 55+.
HSAs provide tax deductions on contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses. Using other funds for current healthcare costs and letting your HSA grow can boost your long-term savings—especially for retirement.
Pro Tip: Need extra funds for healthcare or other major expenses? A home equity loan can provide fast cash access when needed. See how much you can get, how fast you can get it, and how little you'll pay.
4. Leverage capital gains for lower tax rates
Shifting income to long-term capital gains can reduce your tax liability. Investments you’ve owned for over a year may qualify for favorable tax treatment, with long-term capital gains rates significantly lower than those applied to assets sold within 12 months.
Long-term capital gains may be tax-free for those in the 10% or 12% regular tax brackets. This makes capital gains a powerful tool for tax-efficient retirement planning, with strategic asset sales minimizing tax impact.
Pro Tip: Invest smart and enjoy tax savings by opening a SoFi IRA. Watch your investments grow with tax-efficiency in mind for a comfortable retirement. Get started today.
INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE. Brokerage and Active investing products offered through SoFi Securities LLC, member FINRA(www.finra.org)/SIPC(www.sipc.org).
The probability of a member receiving $1,000 is 0.028%. If you don’t make a selection in 45 days, you’ll no longer qualify for the promo. Members must fund their account with a minimum of $50.00 to qualify. The probability percentage is subject to decrease. Members are only eligible for the Stock Award promotion upon opening their first brokerage account; subsequent cash brokerage accounts are ineligible for the promo, including for members with multiple accounts.
5. Implement year-round tax-loss harvesting
Don’t reserve tax-loss harvesting for year-end; employ it all year to enhance tax savings. Selling underperforming investments can offset capital gains and allow you to deduct up to $3,000 in losses against ordinary income.
Staying aware of wash-sale regulations is crucial to fully leveraging these benefits. This practice lowers current taxes and provides carryover opportunities for future tax advantages.
Pro Tip: Stay proactive to secure your financial footing. If you’ve got at least $100,000 in investments, consult with a SmartAsset advisor to gain insights on tax-loss harvesting and ensure no opportunity is missed. Fill out a short questionnaire and get instantly matched with up to three vetted financial advisors in your area.
6. Claim your medical expense deductions
Medical expenses can add up quickly, yet many taxpayers overlook the deductible costs they incur. You may deduct medical expenses exceeding 7.5% of your adjusted gross income.
For unexpected tax deductions within this bracket, include prescriptions, doctor fees, and necessary home modifications. Keeping thorough records is key to maximizing these deductions.
Pro Tip: Slash expenses on dining, travel, eyeglasses, prescriptions, and more with AARP. Anyone 18 or older can join for just $15/year with auto-renewal. Join now and save hundreds.
7. Seek deductions for charitable contributions
Charitable contributions are more than kind gestures; they’re valuable tax deductions.
Cash donations aren’t the only eligible forms; many types of contributions qualify, such as clothing and home goods, often overlooked by those donating.
Accurate valuations are necessary to claim tax deductions for non-cash gifts, ensuring that you both give and gain more effectively.
Pro Tip: Protect your wealth and reduce your tax burden with an asset that can hedge against the damaging effects of a recession and financial calamity by opening a gold IRA.
Smart tax planning keeps your money in your hands
Employing these deductions means more money for your needs and goals rather than inflating your tax bill. However, staying abreast of changing tax laws remains crucial.
Collaborate with tax experts to ensure compliance and refinement of these strategies to suit your fiscal circumstances.
Creating a year-round strategic plan for taxes enhances savings and ensures effective wealth retention.
Pro Tip: Protect your legacy with estate planning. Want to save time, money, and stress while protecting your family? Where there's a will, there's a way.
Add a Comment