How to Reduce Your 2024 Tax Burden

Warren Accounting Group knows how hard you work for your money, and we want to help you keep as much of it as you can. Tax season is months away, but it is never too early to consider ways to reduce your tax burden. Here are 5 ways to reduce your taxable income and keep more of your money.

1. Have a Plan

By planning throughout the year, you are likely to have a better idea what tax bracket you will fall into. If you’ve planned early in the year, you will have time to use some of the tax strategies that will lower your income and benefit you most. And, when you get closer to the end of the year, if you revisit  your strategies, it could help you identify any final opportunities. For example, you may find out you can contribute more pre-tax assets to your 401(k) at year’s end which will help reduce your taxable income.

2. Contribute to Retirement Funds

Contributing to your retirement fund can benefit you by reducing your tax burden in the short term and set you up financially for the future. Your benefits will vary depending on what funds and opportunities you have available to you.

401k: Your contributions are taken out of your paycheck by your employer, so your taxable income will be lower which could reduce the federal taxes you owe at the end of the year. This also benefits you later on in life, as you will have access to your 401k account when you retire.

Traditional IRA: Your contributions to a traditional IRA account are not taxed, lowering your taxable income for the current year.

Roth IRA: Your contributions will not immediately lower your tax bill, but your withdrawal and earnings will be tax-free when you retire.

3. Contribute to a Health Plan

If you are eligible for a health savings plan, contributing to it could reduce your tax burden. Health savings plans are used to pay medical expenses and the withdrawals are tax-free. These account contributions are pre-tax, reducing your taxable income. In addition, any balance left in your health savings plan is rolled over into the next year. So, if you contribute and don’t need to use it, it is available to you year after year.

4. Contribute to a 529

Setting aside money to help send your children or grandchildren to college is another great way to lower your taxable income. In North Carolina, the 529 earnings are free from federal and state taxes, as long as they are used for qualified educational purposes.

5. Make Donations

Charitable donations are deductible, that includes items and cash donations. These types of donations will be itemized on your return, and they can add up. Having a receipt for your donation and making an itemized list of what you donated will help you estimate the value and reduce your taxable income.

If you have any questions about reducing your taxable income, Warren Accounting can help! Our team can review your financial situation and discuss ways for you to take advantage of these and other tax savings opportunities. Contact us today to schedule a meeting!