How to Save Money on Your Taxes This Year
With another year of taxes to prepare for, it’s never too early, or too late, to start thinking about tax planning, getting your documents together, and talking to your accountant about possible deductions and savings you could be making on your 2024 tax returns.
What are Tax Deductions?
Simply put, tax deductions are items you have paid throughout the year that can be taken into account when you pay your taxes. That deduction can reduce your taxable income, the amount of income you are required to pay tax on. In some cases, this will lower the amount of money you owe on your tax return and could increase your local, state, or federal tax refund.
Tax credits can also help lower taxes you have to pay. These are fixed-value amounts for different categories that directly lower the amount of tax you owe, not reduce your taxable income. You may not realize that you’re eligible for certain tax credits, so it is important to always talk to your tax preparer about those that might be applicable to your situation.
Tax Deductions and Credits to Claim in 2025
Mortgage Interest
If you bought a home this year, the interest you’ve started paying on
your mortgage may be tax deductible. With today’s interest rates, this extra tax savings can be especially helpful.
If you’ve
refinanced your mortgage this year, you may be able to deduct the interest from the new mortgage. You may also be eligible for a deduction on any mortgage points you paid during your new loan’s origination, maximum loan charges, or any discounts or loans you had on the mortgage.
Energy Efficient Updates
You might be wondering, “Are home improvements tax deductible?” In many cases, if you’ve made
energy-efficient upgrades to your property, you could be eligible for tax credits. The energy-efficient property credit applies to qualifying improvements placed in service between January 1, 2023, and January 1, 2033. Each year, you can claim up to $1,200 for energy-efficient property costs and certain home improvements, with specific limits for doors, windows, and energy audits, and $2,000 for qualified heat pumps, water heaters, biomass stoves, or boilers. Starting in 2025, qualifying items must be produced by certified manufacturers, and you must include the product’s PIN on your tax return.
Home Equity Loan or HELOC Interest
If you took out a
home equity loan or a home equity line of credit (HELOC) in 2024 for
home renovations or improvements, you might be able to deduct the interest on these loans.
Health Savings Account Contributions
Depending on the type of health insurance coverage you have through your employer, you may have the opportunity to contribute to a
health savings account (
HSA) directly from your paycheck. Not all companies offer this, so you can also set up your own accounts and
claim deductions for healthcare expenses.
Retirement Plan Contributions
Much like an HSA, employer-sponsored retirement program contributions can come out of your paycheck tax-free. If you have a traditional IRA, you may also be able to deduct contributions.
How much you can deduct from your retirement plan depends on the
tax bracket you fall into and your filing status. For instance, if you’re single or head of household and have a modified adjusted gross income of $77,000 or less, you may be able to deduct the full amount of your contribution limit. It’s always best to talk to your tax preparer and check the
IRS guidance for your situation.
Student Loan Interest
If you made student loan payments, you likely paid interest on those loans. This interest may be tax deductible, so make sure you have the necessary paperwork come tax time.
Charitable Contributions
Donations made to
qualifying charitable organizations may also be tax deductible. You’ll want to check if the charity is tax-exempt and listed as a 501(c)(3) public charity to be able to deduct any donations made this year.
Medical Expenses
You may be able to deduct some medical expenses, such as preventative care, surgeries, and some dental and vision treatments. Any unreimbursed medical expenses that exceed 7.5% of your adjusted gross income could be tax deductible.
Other Taxes
You may also be eligible for income tax deductions for other taxes you’ve paid this year. Property, state, and local taxes may have been due at various points in the year, so they could be deductible on your annual filing.
If you itemize your taxes, you can also claim sales tax deductions at both the state and local level for income taxes you paid during the year. However, this means you’ll need to keep extensive records of anything you bought that you want to file a deduction for.
Child and Adoption Credit
If your family grew this year thanks to a birth or an adoption, you could receive a tax break. For tax year 2024, the maximum income to claim this credit is $16,810 under this category. For families with children under 17, tax credits of up to $2,000 per child may be applicable.
Savers Credit
The Savers Credit could be applied to benefit low and middle-class Americans over 18 if contributions have been made to a retirement account. Individuals must not be full-time students or listed as dependents on someone else’s tax return.
Individuals must also make under a maximum adjusted gross income to qualify for this IRS credit—for 2023 and still the case for 2024, married filing jointly is an income of $73,000, while other filing statuses are $36,500.
Electric Vehicle Tax Credit
For those who purchased an electric vehicle in or after 2023 or plug-in hybrids, tax credits up to $7,500 for new vehicles or $4,000 for used cars may be claimed as a tax credit.
Standard Deduction
Standard deductions are what the vast majority of people use when they file their taxes. The alternative is meticulously recording everything spent during the year to itemize filing. For tax year 2024 , the standard deductions for a single person is $14,600, while married filing jointly is $29,200.
An Earned Income tax credit could be available for low-income taxpayers, both with and without children. Visit the IRS website for more information on
Earned Income Tax Credit Tables.
Homestead Credits
There are also homestead credits in both Wisconsin and Illinois that could lower overall taxes paid. Individuals and families must meet several qualifications to qualify for these tax credits.
Dependent Care Credit
If you look after children or other dependents under 13 or who are incapable of caring for themselves, you could qualify for up to $3,000 credit for expenses for one dependent or $6,000 for two or more.
Lifetime Learning
You can claim up to 20% of the first $10,000 in tuition and fees, up to a maximum of $2,000, for any further education you do throughout the year.
American Opportunity Credits
Also known as the AOTC, this credit lets you claim a maximum of $2,500 tax credit for tuition paid per eligible student. Visit the IRS website to learn more about the American Opportunity Tax Credit and who is an eligible student for
AOTC.
Save on Your Taxable Investments
If you have any
investments, your
wealth manager can help you maximize your savings when filing your taxes. Working closely with a financial advisor and reviewing your tax situation with them can lead to better long-term results. With various account types and different tax implications, a qualified professional can help determine which is best for you and your situation.
Schedule a conversation with your
wealth manager to explore tax-saving strategies that align with your
investment goals.
Get Help With Your Finances in 2024
As you prepare your finances for a new tax season, First National Bank and Trust is here to help. For tax questions and eligibility, it’s best to consult your accountant or visit the
IRS website.
We can help you maximize your tax savings by opening a retirement or health savings account, while our wealth managers can provide personalized wholistic financial advice.
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