Welcome to Extreme Investor Network, where we provide expert insights and unique information on personal finance to help you optimize your finances and achieve your financial goals. Today, we are discussing strategies to lower your taxes or boost your refund for 2024.
Since the Tax Cuts and Jobs Act of 2017, there are fewer ways to reduce your taxes, according to certified financial planner Tricia Rosen. The standard deduction was doubled, making it more challenging to surpass this threshold with itemized deductions for expenses like charitable gifts, medical expenses, or state and local taxes. For 2024, the standard deduction is $29,200 for married couples filing jointly and $14,600 for single filers.
However, there are still year-end tax planning strategies you can consider. Here are some tips to help you optimize your finances:
1. Boost pre-tax 401(k) contributions: Increasing your pretax 401(k) contributions for 2024 can reduce your adjusted gross income. This provides an upfront tax break, although you will pay regular income taxes on withdrawals during retirement. For 2024, employees can defer up to $23,000 into 401(k) plans, with an additional $7,500 for catch-up contributions for workers aged 50 and older.
2. Increase paycheck withholdings: If you anticipate a tax bill, consider increasing your paycheck withholdings or making payments to the IRS. Changes in your life, such as second jobs, marriage, divorce, or the birth of a child, can impact your tax situation. Make sure to review your Form W-4 to ensure your withholding elections align with your current circumstances.
3. Consider ‘bunching deductions’: As the year comes to a close, evaluate your itemized deductions to determine if you are close to exceeding the standard deduction. You can “bunch deductions” by consolidating expenses like charitable gifts into a single year to reach the itemized deduction threshold. By running projections, you can assess how this strategy may impact your taxes for the current year.
By implementing these strategies and staying informed about changes in tax laws, you can optimize your finances and make the most of your money. Stay tuned to Extreme Investor Network for more expert insights and tips on personal finance.