Use These Tax Strategies and Elections to Increase your 2024 Tax Deductions

These strategies and a few little-known elections can save you money on your 2024 tax returns and/or in future years

1. Make a deductible IRA contribution of up to $7000 per person ($8000 if over age 49) by April 15^th, 2025 for 2024 and deduct it on your 2024 tax return. The tax savings will depend on which tax bracket you’re in.
2. If you have a qualified health savings plan, make a health savings account deposit of up to $4150 single or $8300 for family coverage by April 15, 2025 for 2024 and deduct on your 2024 tax return.
3. If self-employed, establish and fund a SEP-IRA for 2024 by the extended due date of your tax return and deposit the lesser of $69,000 or 25% of income.
4. Small business owners may deduct home office expenses from 2024 if they have a place in their home that is used regularly and exclusively for business using your choice of actual expense allocation or the IRS safe harbor amount. The deductions are calculated based on 2024 annual expenses. It’s a classical strategy that converts personal expenses to business deductions.
5. Fund a 2024 Roth IRA for kids with earned income.  There is no requirement to deposit the maximum, so even $100 works.  This starts the 5-year clock (makes withdrawals penalty free) for kids at a very early age.  Investments over time often outweigh any tax benefits of the traditional IRA.  Regular contributions can be withdrawn at any time and are great for future education expenses.  Withdrawals for future first time homebuyer can include contributions and up to $10,000 in gains tax/penalty free.
6. Similarly, open a 529 plan for yourself, spouse, child or grandchild to start the 15 year tax free Roth conversion clock now.
7. Tax elections that might be useful-
   1. 10T home equity debt election-Generally interest on loans where your personal residence is used as collateral is not deductible unless the proceeds are used to buy, build or improve your personal residence.  However, tracing rules can be used to allow the loan proceeds to be used for business investments or rental real estate purchases which then allows the interest on those loans to be deductible.Section 266- many taxpayers are permitted a deduction for amounts paid or accrued for taxes, interest and other carrying charges.  Section 266 provides an option that allows capitalizing those costs that would otherwise be deductible.  As an example, raw land is assessed tax annually but many that own the land use the standard deduction instead of itemizing and therefore have no path for claiming those deductions (normally claimed on Schedule A for those that itemize).  Section 266 would allow the tax assessed to be added to the land’s basis each year, thus reducing gains when the property is eventually sold.
   1. The de minimis safe harbor election (Section 1.263(a)-(1)(f)for rental property increased to $2500 per invoice or item for taxpayers without applicable financial statements. The prior allowed amount was $500 and increased to $2500 in 2016.