If you haven’t checked your tax bracket lately, it might be a good time to take a peek. The 2024’s tax rates and income brackets are readily available and the new year will be here before you know it. The following are some last minute considerations to help you nudge that number down if you’re hovering close to the cut off point.
1. Raise Your Contribution and Lower the Bracket Bar
Because your contribution to a 401(k) or another qualified retirement plan is made with pre-tax dollars, they aren’t included in your taxable income. While you don’t actually claim the deduction—the employer does that, it can lower your taxable income. As long as it’s traditional 401(k) and not a Roth 401 (k), your contribution does decrease taxable income and can help put you in a lower tax bracket.
This advantage increases for higher income earners. Per the Internal Revenue Services’ Tax Inflation Adjustments for Tax Year 2024, it works like this. A single earner who makes $208,000 a year and also contributes $5,000 annually to a plan is in the 32% tax bracket for 2024. The tax savings from the contribution is $5,000 multiplied by 32%, or $1,600.2.
2. Double Down on Donations & Gifts
If you itemize, charitable donation deductions allow between 20% and 60% of your adjusted gross income.
In addition to money donated to your favorite charity, you can also contribute physical items such as furniture, electronics, and even cars. There are several organizations that operate thrift stores that operate to thrift stores and will come to your home to haul away large items for free. To find the charitable organizations close to you, simply Google “pickup furniture donation” or “pickup car donation.”
It’s also a lovely time of year to make a gift to a worthy cause. To choose a charity, you can check out sites like Charity Navigator or Candid. Some organizations even accept financial assets such as stocks and assets of private business interests, which are all tax deductible.
3. Make that Move Now (or Tally Up the Costs of a Recent Relocation)
Without a doubt, one of the most overlooked tax donations is reimbursed moving expenses that were incurred for a job re-location. (This deduction is not available to active duty military who moved because of military orders.)
If you sold a home this year, or will do before December 31st, you can deduct expenses related to pay outs involved such as real estate agent commissions, inspection fees, and other related payments.
4. Track Medical Expenses
You can also deduct medical expenses that exceed 7.5% of your adjusted gross income. However, you cannot deduct any expenses your insurance company reimburses you for. Travel to receive medical care can also be deducted, including mileage, parking, tolls, and hotel stays as long as they exceed the 7.5%.
5. Your Gambling Loss May Be Your AGI Gain
Yes, you can even deduct gambling losses to lower your Adjusted Gross Income. If you report $5,000 in gambling income, you can deduct the entire $5,000 in losses, as long as the amount of the losses does not exceed your winnings on your itemized deductions. However, you must have the records to back it up. Professional gamblers need to file on Schedule C.
Additional Deductions
Don’t discount other deductions that will help to further limit your tax liability. Things like expenses incurred during the pursuit of a hobby, interest on the money borrowed to purchase an investment, casualty and theft losses incurred on income property, estate tax, and more. Don’t overlook these other tax-saving opportunities while you’re getting everything together for next April.
The tax rates for different filing statuses are as follows:
10% tax rate applies to income:
- Single: $0 to $11,600
- Married filing jointly: $0 to $23,200
- Married filing separately: $0 to $11,600
- Head of household: $0 to $16,550
12% tax rate applies to income:
- Single: $11,601 to $47,150
- Married filing jointly: $23,201 to $94,300
- Married filing separately: $11,601 to $47,150
- Head of household: $16,551 to $63,100
22% tax rate applies to income:
- Single: $47,151 to $100,525
- Married filing jointly: $94,301 to $201,050
- Married filing separately: $47,151 to $100,525
- Head of household: $63,101 to $100,500
24% tax rate applies to income:
- Single: $100,526 to $191,950
- Married filing jointly: $201,051 to $383,900
- Married filing separately: $100,526 to $191,950
- Head of household: $100,501 to $191,950
32% tax rate applies to income between:
- Single: $191,951 to $243,725
- Married filing jointly: $383,901 to $487,450
- Married filing separately: $191,951 to $243,725
- Head of household: $191,951 to $243,700
35% tax rate applies to income between:
- Single: $243,726 to $609,350
- Married filing jointly: $487,451 to $731,200
- Married filing separately: $243,726 to $365,600
- Head of household: $243,701 to $609,350
37% tax rate applies to income over:
- Single: $609,351 or more
- Married filing jointly: $731,201 or more
- Married filing separately: $365,601 or more
- Head of household: $609,351 or more
Source: IRS
The Florida Bar Board-Certified Attorneys, David E. Klein and Guy Rabideau at Rabideauklein.com have the expertise and experience you need to ensure that your interests are protected throughout your real estate transactions. Contact Rabideau Klein to discuss the legal implications of your next Florida property sale or purchase.