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There’s still time to lower your taxes or boost your refund for 2024, financial experts say.
Typically, there’s a refund when you overpay taxes during the year via withholdings or estimated payments. You can expect a tax bill when you don’t pay enough.
Since the Tax Cuts and Jobs Act of 2017, or TCJA, there are fewer ways to reduce your taxes, said certified financial planner and enrolled agent Tricia Rosen, founder of Access Financial Planning in Newburyport, Massachusetts.
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When filing taxes, you take the standard deduction or total itemized tax breaks, whichever is larger.
Enacted by former President Donald Trump, the TCJA doubled the standard deduction, which means fewer people claim itemized tax breaks for charitable gifts, medical expenses or state and local taxes.
“It’s tough to get over the standard deduction, especially if you’re married,” Rosen said. For 2024, the standard deduction is $29,200 for married couples filing jointly and $14,600 for single filers.
However, there are some year-end tax planning strategies to consider, experts say.
Boost pre-tax 401(k) contributions
There’s still time to increase your pretax 401(k) contributions for 2024, which reduces your adjusted gross income, Rosen said.
Pre-tax deferrals provide an upfront tax break, but you’ll pay regular income taxes on withdrawals in retirement.
For 2024, employees can defer up to $23,000 into 401(k) plans, up from $22,500 in 2023. Workers age 50 and older can save an extra $7,500 for catch-up contributions.
Increase paycheck withholdings
If you’re expecting a tax bill, you can increase paycheck withholdings or make payments to the IRS, according to Tommy Lucas, a CFP and enrolled agent at Moisand Fitzgerald Tamayo in Orlando, Florida.
Often, taxpayers make withholding elections once via Form W-4, but “there’s a whole slew of things that can change,” such as second jobs, marriage, divorce or birth of a child that may impact your situation, Lucas previously told CNBC.
Consider ‘bunching deductions’
As year-end approaches, you can tally your itemized deductions to see if you’re close to exceeding the standard deduction, Rosen said.
Depending on your goals, you could weigh “bunching deductions” into a single year to reach the itemized deduction threshold, she said.
For example, you could combine charitable gifts for multiple years into a single one rather than making donations yearly.
Typically, Rosen runs projections both ways to see how it could impact a client’s taxes for the current year.