12 Ways to Reduce Your 2024 Taxes

By Mitchell J. Smilowitz, CPA

As the end of the 2024 approaches, it’s a good time to begin preparing for tax filing season. This article highlights tax deductions and tax credits for which you may be eligible. Some require that you take action before the end of the year.

Tax Deductions

Maximize Your JRB Retirement Plan Contribution

Increasing your JRB retirement plan contribution is one of the most effective tax reduction strategies available. Contributions to your JRB account reduce your taxable income dollar-for-dollar up to federal limits. $1,000 invested in your retirement account reduces your taxable income by $1,000. Retirement savings also build long-term financial security. This tax benefit is available regardless of whether you itemize or take the standard deduction.

In addition to reducing taxable income, clergy also reduce their Self-Employment tax (SECA) when making contributions to their JRB retirement account.

Itemized Tax Deductions

Unreimbursed Medical and Dental Expenses that exceed 7.5% of your adjusted gross income (AGI) can be deducted to reduce your taxes. This includes health insurance premiums and qualified long-term care premiums.

Property taxes and state and local income taxes can be deducted up to a maximum of $10,000 if single or married filing jointly; $5,000 if married and filing separately.

Interest Paid on Your Home Mortgage and home-equity loan (or line of credit) can be deducted on the first $1 million in mortgage debt ($750,000 on houses purchased after December 15, 2017). If you pay “points” when you first originate your mortgage, you can deduct them gradually over the life of the loan or all at once. You can deduct the interest paid on a home equity loan only if the funds are used to buy, build or “substantially improve” your home.

Donations to public charities are generally deductible, but limits may apply to high earners.

Interest paid on student loans can be deducted up to a maximum of $2,500, but there are income limits. You can deduct student loan interest even if you do not itemize.

An eligible educator can deduct up to $300 of any unreimbursed expenses for classroom materials, such as books, supplies, computers (including related software and services) or other equipment used in the classroom. Educators can take this deduction even if they do not itemize.

Tax Credits

The Child Tax Credit is worth $2,000 per qualifying dependent child under age 17 if your AGI is $400,000 or below (married filing jointly) or $200,000 or below (all other filers). If your AGI exceeds the above limits, your tax credit is reduced. If you qualify for the Child Tax Credit but you don't owe taxes or owe less than your credit amount, you may be eligible for a partial refund (maximum $1,600).

The Child and Dependent Tax Credit helps parents or caregivers cover the cost of qualified care expenses for a child under 13 or dependent care for a spouse, parent or other dependent. To qualify for the credit, a taxpayer must have earned income throughout the year and used the care expenses so that they could work or seek employment. Depending on your AGI, the child and dependent care credit is worth 20% to 35% up to $3,000 (for one qualifying dependent) or $6,000 (for two or more qualifying dependents).

The American Opportunity Tax Credit allows eligible taxpayers (student, parent or spouse) to claim an Education Tax Credit. The Credit covers 100% of the first $2,000 spent on qualified education expenses (such as tuition, fees and textbooks) and 25% of the next $2,000 for a total tax credit of $2,500 for each qualifying student. If the credit amount exceeds the tax owed for the year, you may be eligible for a partial refund.

The Lifetime Learning Credit covers qualified tuition and related expenses. To qualify, you or your dependent must be: 1) enrolled or taking courses; 2) at an eligible educational institution to get a degree, recognized education credential or to improve job skills; and 3) for at least one academic period during the tax year. The credit equals 20% of the first $10,000 of qualified  expenses or a maximum of $2,000 per return. This credit is not refundable. There are income limits.

Saver’s Tax Credit. You may be able to claim up to a $2,000 tax credit on contributions made to your JRB retirement account. The credit is limited to married couples with an AGI of $73,000 and below ($54,750 for heads of household and $36,500 for all other filers).

Summary

Tax deductions reduce your adjusted gross income; tax credits reduce the taxes you pay on that income. This article describes some common tax deductions and tax credits for which you may be eligible.

Increasing the contribution to your JRB retirement account remains one of the best tax reduction strategies available. But you must act soon! To reduce your 2024 taxes, you must make your contribution before the end of the calendar year. Not only will you reduce this year’s taxes, you will build financial security. Please contact the JRB via email or by calling 888-JRB FREE (572-3733) if you have questions about reducing your taxes.

This article is intended for informational purposes only. Please consult a tax professional for specific tax advice.

November 2024