It’s not an exaggeration to say that the tax code is massive—and complicated. Consequently, it happens to contain a handful of often-overlooked strategies for saving money. There’s a chance you’ll be able to reduce your taxes by navigating these deductions. So be sure to take a closer look, and remember that our team is always here to help you along the way!
How Can You Save More Money on Your Taxes?
In order to maximize your tax savings, it’s important to have a solid plan. Understanding a little more about the possible savings strategies out there can give you a good leg up for reducing your tax liability next year. These tips can help.
- Maximize Your HSA Contributions
Health Savings Accounts (HSAs) give you a great way to save on taxes if you have a high-deductible health plan. This is because contributions to an HSA are tax-deductible. What’s more, the money can grow tax-free; and your withdrawals for qualified medical expenses will be tax-free too.
Maximizing your HSA contributions not only lowers your taxable income but also helps you save for future medical expenses. For 2024, individuals can contribute up to $4,150 in their HSA. Married couples and families are able to contribute up to $8,300. Plus, if you’re 55 or older, you can make an additional catch-up contribution of $1,000.
- Deduct Student Loan Interest
No matter your age, if you’re paying off student loans, you may be eligible to deduct the interest you’ve paid. This deduction can apply to up to $2,500 per year, and you can still qualify even if you don’t itemize your deductions.
In order to claim this deduction, your modified adjusted gross income (MAGI) must be below $85,000 for single filers, or $170,000 for married couples filing jointly. These limits can change, though, so it’s always helpful to check the latest IRS guidelines for any updates.
- Consider Bundling Itemized Deductions
The standard deduction has been raised significantly in recent years, which means fewer people benefit from itemizing deductions. However, if your itemized deductions are close to the standard deduction amount, you might save money by bundling deductions into one tax year.
For example, if you have large medical expenses or charitable donations that you tend to make annually, you could choose to make those payments all within one year rather than spreading them out across multiple years. This type of creative strategy can help you exceed the standard deduction threshold and maximize your tax benefits for that year. It definitely requires a little extra planning, but the kickbacks on your tax return can be pretty substantial!
- Donate Some Appreciated Assets
Donating appreciated assets, such as stocks or mutual funds, can be another tax-efficient way to give to charity. When you donate appreciated assets that you have held for more than a year, you can deduct the fair market value of the assets without having to pay capital gains tax on the appreciation. It’s a win-win type of scenario. You’re able to support your favorite causes, while also reducing your tax burden.
The key here is to make sure that the charity is a qualified 501(c)(3) organization. This accreditation is what will ensure that your donation is tax-deductible. With that confirmed, you’ll be all set to move forward.
- Know the Taxability of Your State Refund
If you received a state tax refund last year, it’s important to understand whether it’s taxable on your federal return. This can be tricky, because if you itemized your deductions last year and received a state tax refund, you might have to include it as income on your federal tax return this year.
On the other hand, if you took the standard deduction last year, the state refund is not taxable. Keeping track of how you handled your deductions in previous years will help you correctly report any state refunds and avoid unnecessary taxes.
- Fully Contribute to Your Retirement Accounts
Last but not least, taxpayers can score some pretty substantial tax savings by contributing to their retirement accounts. Contributions to your traditional 401(k) or IRA are tax-deductible, which means you’ll be reducing your taxable income for the year. Even better, you’ll be preparing yourself for the future!
- Claim All State Tax Deductions
Each state has its own tax laws and deductions, so it’s always beneficial to brush up on your knowledge of the specific deductions available in your state.
Want to Reduce Your Taxes? We Can Help!
Common state deductions can relate to your property taxes, mortgage interest, and contributions to state-specific college savings plans. Some states also offer unique deductions for the cost of education or healthcare expenses. Talking with a tax planner can help you verify that nothing is getting missed. If you’d like to schedule a time to talk with our team at NSO & Company, just send us a message. We’re always happy to connect with new clients and existing clients who want a little extra guidance!