Tax season may be a stressful time and you may be worried about overpaying on your taxes. But don’t panic! We will walk you through different options you can leverage to maximize your tax benefits and reduce your tax bill for the year. These include credits, deductions and advanced investment strategies. Without further ado, here are 10 ways to reduce your taxes in 2024! 

Contribute to a Retirement Account 

Maximizing your retirement contributions is one of the best ways to minimize your tax liability. This is because retirement plans offer useful tax advantages that are not available if you simply put your money in a savings account. Contributions to traditional 401(k) and IRA accounts can be deducted from your taxable income and, as a result, reduce the amount of federal tax you owe. These funds also grow tax-free until retirement.  

There are several accounts to consider, depending on your circumstances: 

• 401(k), 403(b), and 457 Plans: Allow you to contribute up to $23,000 annually for 2024 ($30,500 if over age 50). Moreover, contributions done pre-tax won’t show up as part of your annual income.  
• Traditional IRA: You can contribute up to $7,000 for 2024, with a $1,000 catch-up contribution limit for people over age 50. These contributions can be made before April 15^th, which marks the tax filing deadline. 
• Roth IRA: Includes no required minimum distributions (RMDs), tax-free withdrawals after age 59½, and the ability to pass wealth tax-free to your heirs. The contribution limits are the same as traditional IRAs, however, Roth IRAs have income restrictions and you may not be able to open an account outright if you are above certain limits. 

You should be aware that while contributions to workplace 401(k) accounts must be made by the end of the calendar year, tax-deductible contributions can be made to traditional IRAs up until the tax-filing deadline.  

Open a Health Savings Account 

If you spend it on medical expenses, that’s money that never gets taxed. Contributions to Health Savings Accounts offer an immediate tax deduction, grow tax-deferred and can be withdrawn tax-free for qualified medical expenses. Any balance left at the end of the year can roll over indefinitely, similar to assets in a retirement account. 

HSAs can be a great tax-management tool if you are able to pay medical expenses out of pocket and leave the HSA funds to grow. The 2024 limits increased to $4,150 and $8,300, respectively. If you are 55 or older, you may also be able to make catch-up contributions of $1,000 per year. You have until April 15th for your contributions to count for the previous year’s tax return.  

Check for Flexible Spending Accounts at Work 

If you don’t have a high-deductible health insurance plan, you can still pay for medical expenses with tax-free dollars if your employer offers flexible spending accounts. FSAs use payroll deductions to fund an account, which can be used to pay for expenses ranging from insurance copays to dental cleanings to over-the-counter medication. 

Use Your Side Hustle to Claim Business Deductions 

Self-employed people are eligible for scores of tax deductions: your freelance projects or time spent as a ride-share driver could land you considerable tax savings. 

A few of the business deductions available include business-related vehicle mileage, shipping, advertising, website fees, percentage of home internet charges used for business, professional publications, dues, memberships, business-related travel, office supplies and any expenses incurred to run your business. If you pay for your own health, dental or long-term care insurance, those premiums may be deductible too. 

If you work for yourself or have a side business, don’t be afraid to take the home office deduction. To qualify for the deduction, the space must be used regularly and exclusively for business purposes. For instance, if an extra bedroom is used exclusively as a home office and it constitutes one-fifth of your apartment’s living space, you can deduct one-fifth of rent and utility fees.  

Rent Out Your Home for Business Meetings 

Thanks to the Augusta rule, also referred to as the Augusta exemption or the 14-day rule, homeowners can rent out space in their home for 14 days and not report the income to the IRS. The requirement is that the home cannot be the owner’s primary place of business. 

For business owners who don’t have a home office, this can be a way to reduce taxes, through renting out a room in the house for a business meeting, deduct the cost from the business taxes and then not have to claim the rental fees on their personal tax return. 

Deduct Half of Your Self-Employment Taxes 

The government assesses a 15.3% Federal Insurance Contributions Act tax on all earnings to pay for the Social Security and Medicare programs. 

While employers split the cost with their workers, self-employed individuals are responsible for paying the entire amount themselves. To compensate for the extra expense, the government will let you deduct 50% of the amount paid from your income taxes.  

Get a Credit for Higher Education 

The government offers tax credits to offset the cost of higher education. The American opportunity tax credit can be claimed for the first four years of college and provides a maximum credit of $2,500 per student per year. Since it’s a credit, that amount is deducted from whatever tax you might owe the government. If it exceeds the amount of taxes you owe, up to $1,000 may be refundable to you. 

Meanwhile, the lifetime learning credit is great for adults boosting their education and training. This credit is worth up to $2,000 per year and helps pay for college and educational expenses that improve your job skills.