.png)
Discover essential tax deductions and credits for the 2024 tax year (due in 2025). Learn how to maximize your savings with expert tips on property taxes, mortgage interest, education credits, retirement contributions, and more.
.png)
Each year, taxpayers have the opportunity to reduce their tax liabilities or even receive a refund by leveraging a variety of tax deductions and credits. Whether you’re filing as an individual, a small business owner, or jointly with a spouse, understanding available tax benefits is key to maximizing your returns. Here’s a detailed guide to common write-offs and strategies you may be able to claim for the 2024 tax year (taxes due in 2025).
Property owners can benefit from deducting property taxes, but there’s a cap. Since the Tax Cuts and Jobs Act of 2017, the total deduction for state and local taxes (SALT), including property taxes, has been capped at $10,000 per year. This applies whether you're itemizing deductions or paying local income taxes.
💡 Pro Tip: If Congress does not renew the SALT cap by the end of 2025, this limit will expire. Consider consulting a tax advisor to determine the best strategies to manage your property tax payments under current legislation.
If you have a home mortgage, you may be eligible to deduct the interest paid during the year. However, there are limits: for mortgages originated after December 15, 2017, interest is only deductible on the first $750,000 of mortgage debt (or $375,000 for married individuals filing separately).
Don’t Forget: Keep track of Form 1098 from your mortgage lender. This document summarizes the mortgage interest you paid throughout the year and is essential for filing.
You can also deduct state and local income taxes paid throughout the year, but as with property taxes, these deductions are limited to a total of $10,000 annually. This cap applies to combined state income taxes, property taxes, and any local taxes paid.
💡 Tip for High Earners: If you live in a state with no income tax but pay high property taxes, you’ll reach the SALT cap quickly. Evaluate whether other deductions make more sense for your financial situation.
Homeowners enjoy several additional tax perks. Mortgage insurance premiums, real estate taxes, and home equity loan interest (if used for significant improvements) can all be deducted.
Planning Ahead: If you’re considering a major home renovation in 2024, keep detailed receipts and records to prove the expenses were for home improvement, as this affects deductibility.
Generosity pays off at tax time. Cash contributions to qualified charities are typically deductible up to 60% of your adjusted gross income (AGI). Non-cash donations, such as clothes or household items, are also deductible, though these may require additional documentation if the value exceeds $500.
Best Practice: Always keep donation receipts. For higher-value non-cash donations, consider obtaining an appraisal to substantiate your claim.
Medical and dental expenses exceeding 7.5% of your AGI are deductible if you itemize. These can include out-of-pocket expenses for doctor visits, surgeries, prescription medications, and even travel expenses for medical purposes.
🚗 Claim Medical Mileage: The IRS allows you to deduct mileage for medically necessary travel. For the first half of 2024, the rate is 18 cents per mile, increasing to 22 cents per mile starting July 1.
💡 Did You Know? You can deduct medical expenses in the year they’re charged to your credit card, even if you repay the card later.
The Lifetime Learning Credit is a valuable benefit for individuals pursuing post-secondary education. It allows taxpayers to claim 20% of the first $10,000 of qualified education expenses, up to a maximum of $2,000 per return.
Eligible expenses include tuition, books, and required supplies for you, your spouse, or a dependent. However, this credit is non-refundable, meaning it can reduce your tax liability to zero but will not result in a refund.
This credit applies to the first four years of college education and offers a maximum benefit of $2,500 per eligible student. The IRS will even refund 40% of any unused portion of this credit (up to $1,000).
Pro Tip: You cannot claim both the American Opportunity Tax Credit and the Lifetime Learning Credit in the same year. Compare your eligibility and choose the option that maximizes your savings.
Saving for retirement can provide significant tax benefits. Contributions to a 401(k), traditional IRA, or Roth IRA may qualify you for a credit of 50%, 20%, or 10% of your contribution, depending on your AGI.
For 2024, the maximum contribution limits are:
Double Benefit: Contributions to traditional IRAs are tax-deductible, and any employer matches in a 401(k) plan don’t count as taxable income.
Self-employed individuals can deduct 100% of health insurance premiums paid for themselves, their spouses, and their dependents. Even premiums for non-dependent children under age 27 are deductible.
💡 Limitations: This deduction is not available if you’re eligible for a subsidized health plan through an employer.
If you paid interest on a qualified student loan in 2024, you might be able to deduct up to $2,500 from your taxable income. Eligibility is based on your income, so higher earners may see a reduced benefit.
Documentation Tip: Form 1098-E from your loan servicer will outline the interest you paid, ensuring you don’t miss this deduction.
For many taxpayers, the standard deduction simplifies the filing process. For the 2024 tax year, these amounts apply:
💡 Choose Wisely: Compare the value of your itemized deductions to the standard deduction. If your itemized deductions are less, stick with the standard deduction.
Tax season can be overwhelming, but staying organized throughout the year reduces the stress of filing. Avoid these common mistakes:
1. Not Reporting All Income Sources: Ensure all income, including freelance work and side gigs, is accounted for.
2. Overlooking Deductions: Failing to track eligible deductions, like charitable contributions or medical expenses, can result in missed savings.
3. Retirement Oversights: Forgetting to contribute to retirement accounts can reduce your tax-deductible contributions.
Proper record-keeping is the cornerstone of effective tax preparation. Here’s how to stay on top of things:
If you plan to itemize, maintaining detailed records is crucial. For those taking the standard deduction, basic documentation is sufficient, but it’s still wise to keep receipts for major expenses.
While the 2024 tax season may seem far off, effective planning starts now. By keeping track of eligible deductions and credits, you can save significant money and ensure a smoother filing process. Whether you’re a seasoned taxpayer or filing for the first time, a proactive approach can make all the difference.
For personalized advice tailored to your financial situation, consult a tax advisor or financial professional. Remember, tax preparation isn’t just a once-a-year task—it’s a year-round effort that can set you up for financial success.
If you have questions about any of these deductions or credits, don’t hesitate to reach out. A conversation with a tax professional could reveal additional opportunities for savings!
Being audited is comparable to being struck by lightning. You don't want to practice pole vaulting in a thunderstorm just because it's unlikely. Making sure your books are accurate and your taxes are filed on time is one of the best ways to keep your head down during tax season. Check out Vincere's take on tax season!
This post is just for informational purposes and is not meant to be legal, business, or tax advice. Regarding the matters discussed in this post, each individual should consult his or her own attorney, business advisor, or tax advisor. Vincere accepts no responsibility for actions taken in reliance on the information contained in this document.
For business tax planning articles, our tax resources provides valuable insights into how you can reduce your tax liability now, and in the future.
.png)