Tax Tips for Individuals

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.

Have a hobby that’s become a passion? Maybe you’ve been crafting decorative wreaths to sell at local street fairs. Or perhaps you turned your love of fashion into a small side hustle, reselling thrifted treasures or styling your friends for big events.

Anytime money is exchanged for goods or services, the IRS will expect their cut. With part-time gigs becoming a more common way to generate income, here’s what you need to know from an IRS standpoint.

Defining hobby vs. business

The IRS considers a hobby any activity that’s engaged in primarily for pleasure, recreation or personal fulfillment — not for profit. But there are exceptions. For example, if you occasionally sell your homemade quilts at a yard sale and make a few bucks, it’s not typically considered taxable business income.

On the other hand, a business is an endeavor undertaken with the intention of making a profit. The key here is your intent.

You might not be profitable yet, but if your goal is to make money, the IRS may consider this a business. Other factors indicative of a business (according to the IRS) include whether or not you:

• Maintain complete and accurate books and records
• Put time and effort into the activity, demonstrating a plan to make it profitable
• Depends on the income generated from the activity
• Have been successful in making a profit in similar activities in the past
• Expect to make a future profit

Understanding the implications

Whether it’s a hobby or business, maintaining thorough records is crucial for potential dealings with the IRS. For hobbies, keep track of any income earned, especially if you’re generating sales through a payment app. If you receive a Form 1099-K, you’ll need to report the earnings.

 For businesses, you’ll also want to record and report all income and expenses. You may also make applicable deductions. Keeping meticulous records will not only help at tax time but can also provide valuable insights into your business’s financial health. Be sure to regularly review your finances and adjust your strategies as needed.

For fun and profit?

The last thing any taxpayer wants is a surprise letter from the IRS. As your hobby grows, or if you’re considering turning your passion into something more, get up to speed with the tax implications. The experts at Magone & Co can help. For tax planning guidance, 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. 

According to the IRS, medical expenses include the “costs of diagnosis, cure, mitigations, treatment or prevention” of an injury or disease. And dealing with these costs can be a challenging part of life.

But what many taxpayers may not realize is that there are specific tax laws governing the deduction of certain medical expenses to help you save.

Understanding these regulations is essential to ensure you’re maximizing your tax benefits while staying compliant with the law. Here’s a rundown of the basic rules:

Flexible spending accounts (FSAs). An FSA is a tax-advantaged account offered by some employers to help alleviate qualified health-related expenses like prescriptions or eyeglasses. This type of account has a “use-it-or-lose-it” feature, so any money leftover at the end of the year will be forfeited. Keep that in mind when allocating how much to contribute for the year.

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.

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. If you go by car, you can deduct a flat mileage rate, adjusted by the IRS each year, or you can keep track of your actual out-of-pocket expenses for gas, oil, repairs, parking and tolls.

So what’s eligible?

To make the most of your tax deductions, here’s a quick breakdown of items that you may and may not write off.

Questions about your medical deductions? Reach out to the CPAs at Magone & Company to ensure you’re on track to save.

Eligible	Not Eligible
A physician-directed weight-loss program undertaken to treat obesity	Meal replacements, diet foods and supplements, or a weight-loss program to maintain appearance
Treatment at a drug or alcohol clinic, a smoking-cessation program or  a prescription for nicotine withdrawal medication	A doctor-recommended trip or vacation to rest or boost your mood
Acupuncture	Marriage counseling
Dentures, hearing aids and orthopedic shoes	Household help
Admission and transportation to a medical conference concerning the chronic illness impacting you or your family member	The collection and storage of DNA (unless you can prove how DNA will be used for diagnostic testing)
Childbirth classes for a mother-to-be	Maternity clothes
Teeth cleaning and orthodontia	Teeth bleaching
A wig that benefits the mental health of patients suffering hair-loss from disease	Hair transplants
Contact lenses and peripheral materials	Retin-A for wrinkles
Nursing services at home or a care facility	Home nursing services for a normal, healthy baby

 

This information is provided for educational purposes and should not be construed as financial or legal advice. Please consult your accountant or attorney for advice specific to your situation.

The 2017 Tax Cuts and Jobs Act (TCJA) introduced substantial adjustments to estate and gift tax exemptions. The act nearly doubled the lifetime estate and gift tax exemption to $13.61 million per person and $27.22 million for a married couple.

But nothing lasts forever. The increases in the federal gift and estate tax exemption are temporary and are expected to decrease by the close of 2025 and revert to (significantly lower) 2017 rates.

While there’s a possibility for new tax legislation to pass prior to 2026, families who may face tax liability in the near future should review their estate plans now and make some smart money moves to preserve their wealth — before it’s too late.

Building a strategy with estate planning

Take a proactive approach to help safeguard your goals for your legacy while ensuring that your estate plan remains effective and tax efficient. If your family is impacted, consider some options to build long-term financial stability for your loved ones:

• A credit shelter trust may be created by a surviving spouse, following the death of a spouse. Also known as a bypass or exemption trust, it allows your assets to pass on to your remaining beneficiaries — with no estate taxes — when the surviving spouse also passes. If you or your family have assets above the exclusion amount when the current law expires, this type of trust might be worth a discussion.
• Another estate planning tactic for married couples, a spousal lifetime access trust allows one spouse to create an irrevocable trust to benefit their partner. As the grantor, the assets would be taken out of your estate and are available to your beneficiary spouse as needed.This is an option for transferring wealth to your loved one and future generations without exposing the assets to federal estate tax.
• By transferring assets to your heirs now, you can effectively lower your future estate tax obligation and provide asset protection. But what about highly appreciating assets like real estate, stocks or cryptocurrency that may see significant growth in the future? A grantor retained annuity trust allows you to transfer that asset appreciation to your beneficiaries. That means you can potentially eliminate estate and gift taxes that would otherwise be paid on the value of the appreciation.

At Magone & Company, our goal is to help you create long-term financial stability for you and the people who matter most to you. For estate planning guidance or assistance, 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.

From building equity to growing roots in a community, home ownership has some significant benefits — including some hefty tax savings.

Uncle Sam offers homeowners several tax advantages to help ease the financial burden of your costly investment. If you’re thinking of moving into a new home or just settling into your dream home, homeownership not only provides a place to call your own. It also can offer some valuable savings along the way.

Discount points. Considering a home purchase? If you plan to stay in the home for at least 10 years, buying mortgage points — or discount points — may be worth your while.

Each mortgage point represents one percent of your underlying loan amount. While they’re an additional upfront cost at closing, they’re also a way to negotiate a lower interest rate. Plus, they’re deductible.

Mortgage interest deduction. As a homeowner, you can deduct the interest you pay on your mortgage loan from your taxable income. This deduction can result in substantial savings, especially during the early years of your mortgage when the interest portion of your monthly payment is typically higher.

For example, if you purchased a home with a mortgage loan of $300,000 and an interest rate of 4%, you would pay approximately $12,000 in interest during the first year. By deducting this amount, you could potentially lower your tax liability by thousands of dollars.

Property tax deduction. Property taxes are calculated by the local government and are typically based on the assessed value of your home. The good news is that you can deduct the amount you pay in property taxes from your taxable income, reducing your overall tax liability.

This deduction is particularly beneficial for homeowners who live in areas with high property tax rates.

Home office deduction. If you use a portion of your home exclusively for business purposes, you may be eligible for the home office deduction. This allows you to deduct all direct expenses and part of your indirect expenses involved in working from home, including utilities, insurance and repairs.

Keep in mind, this deduction is calculated based on the percentage of your home that is used for business purposes. So if your home office occupies 10% of your total square footage, you can deduct 10% of your eligible expenses.

Home equity loan interest. A home equity loan allows you to access the equity you’ve built in your home and borrow the funds as needed. You can typically borrow 80-85% of your total home equity.

Similar to regular mortgage interest, you can deduct the interest you’ve paid — as long as the funds were spent on making home improvements.

Medically necessary home improvements. And speaking of home improvements, medically necessary home improvements that help you, your spouse or dependents live safely in the home may be deductible. These include widening doorways, lowering cabinets, adding railings and more.

Time to take advantage of homeownership tax benefits

There are few times in life you can get money out of your house — rather than pouring cash into it. Tax season is a key opportunity!  At Magone & Company, we’ll help you get the most tax savings as a homeowner. For tax planning guidance, 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.