Tax Tips for Individuals

Beat the Clock on Tax-saving Strategies

by

This year’s tax deadline is almost here. But the good news is you still have time to make some strategic moves to potentially reduce your tax burden and maximize your financial benefits for 2024.

Here are some last-minute tax-savings opportunities you shouldn’t overlook:

Take advantage of a Health Savings Account (HSA). If you have a high-deductible health plan, contributing to an HSA offers triple tax advantages: tax-deductible contributions, tax-free growth and tax-free withdrawals for qualified medical expenses. For the 2024 tax year, the HSA contribution limits are:

  • Individual coverage: $4,150
  • Family coverage: $8,300
  • Additional catch-up contribution if you’re 55 or older: $1,000

Maximize retirement contributions. If you haven’t already maxed out your IRA contributions for the tax year, you can still contribute up to $7,000 until April 15 — plus another $1,000 in catch-up contributions if you’re 50 or older. These contributions may be tax-deductible depending on your income and whether you have a workplace retirement plan.

Consider a SEP IRA. If you’re self-employed or have freelance income, a SEP IRA is one of the simplest ways to shelter your income. You can contribute up to 25% of your net earnings from self-employment, with a maximum of $69,000 for 2024. Like traditional IRA contributions, you have until Tax Day to make SEP IRA contributions for the previous year.

Reconsider itemizing. Most tax filers choose to take the standard deduction rather than itemize. But this doesn’t mean that you shouldn’t itemize, depending on your circumstances. For example, if you pay a great deal of mortgage interest, itemizing may work in your favor. Take time to add up potential itemized deductions such as:

  • Mortgage interest
  • State and local taxes
  • Charitable contributions
  • Medical expenses over 7.5% of your adjusted gross income
  • Gains from a home sale
  • Losses from disaster or theft

Don’t overlook education costs. The American Opportunity Credit offers up to $2,500 per eligible student, while the Lifetime Learning Credit provides up to $2,000 per tax return. Eligible students may claim these credits for qualified education expenses paid during the tax year.

Review tax credits. In addition to education credits, check your eligibility for other potential tax-saving credits, such as:

  • Child and Dependent Care Credit
  • Earned Income Tax Credit
  • Residential Energy Credits for home improvements
  • Electric Vehicle Credit

Making these smart tax moves before the deadline can significantly impact your tax bill and potentially increase your refund. But tax situations can be complex, and it’s always wise to consult with a qualified tax professional.

At Magone & Company, our expert CPAs can help you achieve the most favorable tax situation based on your unique situation. See if our consultative, relationship-based approach to financial wellness is right for you.

 

 This document is for informational purposes only and should not be considered tax or financial advice. Be sure to consult with a knowledgeable financial or legal advisor for guidance that is specific to your tax situation.

 

Found Money: Common Tax Deductions You May Have Missed

by

Every year, taxpayers inadvertently leave money on the table by overlooking deductions that are rightfully theirs for the taking. The tax code actually offers many legitimate deductions that are IRS-approved and yours for the taking — as long as you claim them. So when tax season rolls around, be sure you’re getting every penny you deserve.

Mortgage interest

If you own a home and have a mortgage, you can deduct the interest you pay on that loan. When you’re in the early years of your mortgage, your savings can be substantial as the majority of your payments go toward interest. And depending on where you live, you may be able to deduct state and local taxes, including property taxes, which can further reduce your tax liability.

Mortgage points

When you take out a mortgage, you may pay “points” — an upfront fee that lowers your interest rate. These points are usually tax-deductible in the year they are paid, even if you don’t itemize.

Home sale costs

Selling your home? The costs associated with the sale, such as real estate commissions, title insurance and legal fees, can be used to offset the capital gains tax on the sale. This helps reduce your overall tax burden.

Home office deduction

If you use a portion of your home regularly and exclusively for business purposes, you may be able to deduct your direct and direct expenses of running a business from your home office, including rent, utilities, insurance and other home-related expenses. Does your home fit the bill? Find out.

Continuing education and professional development costs

Are you or your dependents pursuing higher education? This deduction covers qualified education expenses for eligible students, allowing you to deduct up to $4,000 of qualified expenses, such as tuition and fees. Parents may also deduct interest payments on certain student loans from qualified lending institutions.

Ongoing training and education related to your current job may also be tax-deductible, even if your employer doesn’t reimburse you. As long as the training maintains or improves your job skills, it can qualify.

Medical and dental deductions

Medical and dental expenses that aren’t reimbursed by your insurance may be deducted to the extent your annual total exceeds 7.5% of your adjusted gross income. But to qualify for medical deductions, you must also itemize. When adding up your medical costs, be sure to include the cost of traveling to your doctor or medical facility for treatment, including your out-of-pocket expenses for gas, oil, repairs, parking and tolls.

Long-term care insurance is also a deductible medical expense. As long as your employer or spouse’s employer doesn’t subsidize the insurance, you may deduct an increasing portion of your premium as you age.

Legal and professional fees

Did you know that fees paid to lawyers, accountants, financial advisors and other professionals can sometimes be deducted? This can include the cost of tax preparation, estate planning and even consulting for starting a new business.

Don’t leave money on the table

The professionals at Magone & Company can help you navigate the deductions and tax credits your entitled to claim. Call us today at (973) 301-2300.

 

This document is for informational purposes only and should not be considered tax or financial advice. Be sure to consult with a knowledgeable financial or legal advisor for guidance that is specific to your tax situation.

The IRS’ “Dirty Dozen” — What Tops This Year’s List? Part 2

by

Nearly one in three Americans (31%) report being a victim of online financial fraud or cybercrime.

When it comes to protecting your money and your identity, knowledge is power. Here’s a recap of the last six scams on the IRS’s 2024 “dirty dozen” list.

7.  “Ghost” tax return preparers. Be wary of “professionals” who claim they can help you obtain tax credits or refunds that you don’t even qualify for. Watch for red flags like a high fee based on the size of the intended return or their refusal to include their PTIN (IRS Preparer Tax Identification Number) on the return. These ghost preparers can even steal your entire refund before pulling their disappearing act.

8. Trusting social media. This is a message that sadly bears repeating: Social media platforms like Instagram and TikTok are not reliable sources for tax advice. If a Facebook ad suggests filing inaccurate W-2 forms to increase your tax return, for example, don’t give it a second thought. Remember, just because it’s on the internet does not make it true. Always consult with your tax professional.

9. Spearphishing. A targeted form of phishing, spearfishing aims to deceive businesses or individuals within an organization, typically via email. According to the IRS, scammers can pose as new clients or even as an HR department looking to score sensitive employee data. Always use extra caution when opening emails and clicking links. And think twice before sharing any information.

10. Faux art deductions. Taxpayers may deduct an art donation from their tax bill, but beware of deducting it at an inflated valuation. The IRS warns of “promoters” who sell discounted art with the promise it’s worth more, so it can be donated for a hefty write-off. Don’t fall victim to false claims of deductions on art donations. Uncle Sam will eventually find out.

11. Fake tax avoidance techniques. Taxpayers should be on high alert when encountering any schemes that assure you ways to avoid paying taxes. For example, syndicated conservation easement agreements may inflate tax deductions by exaggerating the value of investments. Bottom line: You can’t avoid paying the IRS.

12. International schemes. Individuals should be cautious of offers to contribute to foreign or overseas retirement accounts. Hiding money offshore as a tax reduction strategy can land you in hot water with the IRS.

As scammers continue their relentless attempts to commit fraud, heed the IRS’s warnings to maintain your identity, your reputation and your bank account. For a quick refresh, check out scams one through six. And don’t hesitate to reach out to the tax professionals at Magone & Company with any questions.

This document is for informational purposes only and should not be considered tax or financial advice. Be sure to consult with a knowledgeable financial or legal advisor for guidance that is specific to your unique circumstances.

The IRS’ “Dirty Dozen” — What Tops This Year’s List? Part 1

by

Every year, the IRS releases its list of the “dirty dozen” scams that taxpayers, including business owners, should be aware of to protect themselves against fraud and identity theft.

As you begin preparing for tax season, here’s part 1 of our recap so you don’t fall victim to these sophisticated cons and schemes:

  1. Phishing or smishing. Designed to steal sensitive personal information, these scams target taxpayers with fake communications from entities posing as the IRS or state taxing authorities. Phishing schemes are generally sent in the form of an email, luring potential victims with the promise of a phony tax refund or the threat of legal action. Smishing scams use similar intimidation tactics via text or SMS messages. Be cautious of any unsolicited emails or texts requesting personal or financial information.
  2. Aggressive promoters of ERC claims. Many employee retention credit (ERC) promoters are responsible for leading unsuspecting employers astray, causing them to file a claim in error. These questionable claims add up to stiff penalties, hefty interest payments and potentially even criminal prosecution. The IRS urges you to carefully review the ERC guidelines before submitting a claim.
  3. Online account help scams. In this scam, a “helpful” third party offers to assist taxpayers in setting up an online IRS account where users can view balances, see copies of their IRS notices and more. With your log-in information in hand, they can easily access your personal information and steal your identity. Be sure to establish an account directly through IRS.gov to prevent the risk of information theft.
  4. Fuel tax credit claims. Similar to the ERC credit, promoters are pushing improper fuel tax credit claims that taxpayers aren’t qualified to receive — and they charge a substantial fee to the taxpayer to make these false claims. Scammers collect the fees while you are left with the responsibility of righting this wrong. Remain cautious and look to a reputable tax professional for their expertise regarding this credit.
  5. Offer in compromise mills. An offer is compromise is a legitimate IRS program that helps taxpayers settle their tax debt for less than what’s owed. But very few people actually qualify.In this scheme, scammers lure their targets with the promise of resolving debt through negotiating an offer in compromise, often requiring hefty fees for the bogus service. If it sounds too good to be true, it is. The phony deal will cost you, but it won’t deliver on its promises.
  6. Fake charities. Following a natural disaster or hardship, some fraudulent groups prey on good-hearted individuals and pressure them into making donations quickly to support the cause — and claim a deduction on their income tax return. Unless you can research and verify the charity, you could be giving your money away to a scammer. Do your due diligence, especially if you feel coerced into giving.

Stay tuned for continued guidance as we recap more scams from the dirty dozen list. In the meantime, don’t hesitate to reach out to the tax professionals at Magone & Company. We’re here to help.

This document is for informational purposes only and should not be considered tax or financial advice. Be sure to consult with a knowledgeable financial or legal advisor for guidance that is specific to your unique circumstances.

 

Unwrap Savings This Holiday Season: 7 Tax To-dos

by

‘Tis the season for twinkling lights, holiday cheer and…tax planning?

As the final days of the year rapidly approach, it’s time to start checking off your tax to-do list for a merrier 2025. Here are some tips to help optimize your tax situation and avoid a Scrooge-like surprise come April.

1. Estimate your taxes. It’s not too late to estimate your 2025 tax liability, ensuring you’re paying enough through withholding or estimated tax payments. Review your income, deductions and credits for the year, and make any necessary adjustments before the year-end.

 Accurate tax estimation and proper record organization not only helps with current year compliance; it also provides a foundation for future financial planning and potential audit defense if you need one.

2. Consolidate financial records. Gather and organize all financial documents such as W-2s, 1099s, receipts, investment statements and records of any additional income streams. Remember, taxable income extends beyond your salary. Investment gains, freelance work, rental income and even certain Social Security benefits all impact your tax obligation.

Act now to help streamline the filing process and avoid missing out on potential deductions or credits, as well as any potential issues with the IRS.

3. Review your retirement accounts. If you have a 401(k), IRA or other retirement savings plan, review your contributions for the year. Contributions are typically tax-deductible, so by contributing the maximum amount allowed, you can lower your tax bill and grow your retirement savings at the same time.

Additionally, if you’re over 50, you may be eligible to make catch-up contributions to your retirement accounts to save even more, while benefiting from additional tax savings.

4. Make charitable giving part of the giving season. The spirit of giving is alive and well, and the IRS loves it too. You can potentially reduce your tax bill by making charitable donations to qualified 501(c)(3) organizations.

 If you’re 70½ or older, you may consider making a Qualified Charitable Distribution (QCD), transferring up to $100,000 directly from your IRA to an eligible charity. If you have loved ones you’d like to gift, explore options like a 529 college savings plan or Roth IRA contributions for gifting them with your generosity — and saving on your taxes.

5. Capitalize on education-related tax breaks. If you or a family member are attending college, trade school or another higher-learning institution, take advantage of valuable tax credits and deductions related to tuition, fees and education-related expenses.

 The American Opportunity Tax Credit and Lifetime Learning Credit can boost your tax refund, while contributions to 529 college savings plans offer future tax-free growth. Review your eligibility for these education-focused tax benefits before the year ends.

6. Optimize your HSA and FSA accounts. Health Savings Accounts (HSA) offer unique triple tax advantages: tax-deductible contributions, tax-free growth and tax-free withdrawals for qualified medical expenses. While most HSAs roll over into the next year, it’s still important to gather all receipts for all HSA distributions, create digital copies of all forms and receipts, and sort qualified vs. non-qualified expenses to keep for your records come filing time. Assess whether to make additional contributions before year-end or wait until the New Year.

Flexible Spending Accounts (FSA) funds must be used within the plan year, though some employers offer a grace period (usually until March 15). Review your FSA balance carefully and create a plan to use any remaining funds before they’re forfeited. This might involve scheduling medical appointments, purchasing eligible supplies or ordering prescription refills. Submit any outstanding FSA claims before the December 31st deadline.

7. Consult a tax professional. Tax professionals, such as certified public accountants (CPAs) or enrolled agents, have specialized knowledge of the latest tax laws, regulations and filing requirements. They can help identify deductions and credits you may have overlooked, recommend tax-saving strategies tailored to your unique situation and ensure you’re in compliance with all applicable rules and deadlines.

Tax pros can also provide ongoing support throughout the year, assisting with quarterly estimated tax payments or advising on the tax implications of major life events like a job change, home purchase or retirement.

Looking for a trusted CPA? The professionals at Magone & Company will consider every deduction and incentive to help make the most of your tax situation for the 2024 tax year and beyond. Call us today at (973) 301-2300 to schedule a confidential consultation. Happy holidays!

This document is for informational purposes only and should not be considered tax or financial advice. Be sure to consult with a knowledgeable financial or legal advisor for guidance that is specific to your unique circumstances.

Countdown to Tax Savings: Year-end Reminders for Individuals

by

As the year winds down, there’s an important deadline looming: the end of the tax year. The good news is you still have time to strategize and potentially reduce your tax burden before the New Year. Here are a few possibilities to get you started:

Check your tax withholding

It you had unexpected income or gains earlier this year and haven’t made estimated tax payments, increase your withholding for the remainder of 2024 to reduce or eliminate any underpayment.

Our tax experts can help you adjust your withholding amount to help eliminate an underpayment penalty.

Consider bunching itemized deductions

When filing, you can deduct the greater of itemized deductions — mortgage interest, charitable contributions, medical expenses and taxes — or the standard deduction.

The 2024 standard deduction is $14,600 for singles and married individuals filing separately, $29,200 for married couples filing jointly and $21,900 for heads of households. If your total itemized deductions will be close to the standard deduction, consider “bunching” itemized deductions, so they exceed your standard deduction.

Sell investments

It you’re looking to sell appreciated securities, it’s typically best to wait until they’ve been held for over a year to generate a long-term capital gain. You may also consider selling stocks that are worth less than amount you paid for them. Taking the resulting capital losses this year will shelter capital gains.

Note that selling investments to generate a tax gain or loss doesn’t apply to investments held in a retirement account where the gains and losses are not currently taxed.

Make charitable donations

You can reduce your 2024 taxable income by making charitable donations, as long as your itemized deductions exceed the standard deduction. If you donate assets to a public charity, you can deduct their fair market value and avoid the tax you would’ve paid if you sold the asset and donated the cash.

If you’re 70½ or older by the end of 2024, have a traditional IRA and are unable to itemize deductions, you may consider making 2024 charitable donations via qualified charitable distributions from your IRA.

Convert a traditional IRA into a Roth account

Converting makes sense when you expect to be in the same or higher tax bracket during your retirement years. In that situation, the current tax cost from a conversion this year could be a small price to pay for eluding potentially higher tax rates in the future on the account’s post-conversion earnings.

Spend remaining FSA funds

Generally, flexible spending account (FSA) funds not spent before the plan’s year-end are forfeited. There are a few exceptions, as some employers can allow their employees to carry over up to $640 from their 2024 medical FSA into their 2025 account.

It’s also a good time to consider increasing the amount set aside for next year’s FSA, especially if you put aside too little for the past year and you’re anticipating similar medical costs going forward.

Take advantage of the annual gift tax exclusion

The basic estate, gift and generation skipping transfer tax exclusion is scheduled to decrease significantly from $13.61 million ($27.22 million for married couples) in 2024 to $5 million ($10 million for married couples) in 2026. Annual exclusion gifts can help reduce your taxable estate. For 2024, you can make annual exclusion gifts up to $18,000 per gift recipients, with no limit on the number of gift recipients.

At Magone & Company, we can help you explore practical, easy-to-implement strategies to achieve a more favorable tax situation. We look forward to working together to create a plan based on your unique tax situation. Give us a call today at (973) 301-2300.

This document is for informational purposes only and should not be considered tax or financial advice. Be sure to consult with a knowledgeable financial or legal advisor for guidance that is specific to your tax situation.