Helpful Information for Filing 2024 Income Taxes
and Proactive Tax Planning for 2025
Income tax is a large revenue source for the United States
government. While tax rates have changed many times,
since the 1860’s, the United States has used a
“progressive” tax code. A progressive tax code means that
people who make more money are taxed at a higher rate
than those who make less money. Our progressive tax
system works by placing earners through different
brackets according to how much money they make. The
dollar amounts define your tax brackets and there are
differing tables depending on your filing status (single,
married, etc.). This matters in determining your marginal
tax rate.
Understanding Marginal Tax Rates
Determining your tax bracket is not as simple as just
adding up your total income and checking a tax table.
Taxpayers need to calculate their income (which can be
sometimes referred to as their “adjusted gross income”)
and then adjust for any deductions to find their final
taxable amount.
Once you determine your taxable income amount, it is
critical to know that your income will be taxed at different
rates. For example, if someone is married filing jointly in
2024 with $105,000 of taxable income, their first $23,200
is taxed at 10%, then $71,100 at 12%, and $10,700 at 22%.
An important concept to understand is that these tax filers
were in a “marginal tax bracket” of 22%. That is, their last
dollar earned was taxed at that 22% tax rate.
2024 Tax Law Updates
2024 brought some tax legislation changes. While there is
time to investigate tax planning ideas for your 2025 taxes,
here are some items that 2024 tax filers should review.
▪ Tax brackets have been slightly adjusted.
▪ Standard deductions have slightly increased.
▪ The cap on state and local tax (SALT) deductions remains.
▪ Long-term capital gains are still taxed at favorable rates.
▪ There is still a 3.8% Net Investment Tax.
▪ Charitable donations are available to those who can
itemize deductions.
▪ You might still be able to contribute to retirement plans.
▪ Medical expense deductions were capped at 7.5% of AGI
for 2024.
Tax planning should always be a key focus when reviewing your personal financial situation. One of our goals
as financial professionals is to identify as many tax saving opportunities and strategies as possible for our
clients. We believe that a proactive approach to looking at your tax situation can lead to better results than a
reactive approach. We hope you find this report helpful.
This special report reviews some of the broader tax laws along with a wide range of tax reduction strategies. As you read this report, please take
note of each tax strategy that you think could be beneficial to you. Not all ideas are appropriate for all taxpayers. We always recommend that you
address any tax strategy with your tax professional to consider how one strategy may affect another and calculate the income tax consequences
(both state and federal). Remember, tax strategies and ideas that have worked in the recent past might not even be available under today’s new
tax laws. Always attempt to understand all the details before making any decisions—it is always easier to avoid a problem than it is to solve one.
Please note: Your state income tax laws could be different from federal income tax laws. Visit https://tax.findlaw.com for a wide range of
information and links to tax forms for all 50 states. All examples mentioned in this report are hypothetical and meant for illustrative purposes only.
We help clients with tax planning and would like to help you!
Most of the Tax Cuts and Jobs Act (TCJA) changes are scheduled to expire on December 31, 2025. The new
administration promised to address tax laws in 2025. Our goal is to keep clients aware of how this may affect them!
(252) 451-0488
www.StrategicFreedom.com
Anthony (Tony) Engrassia, ChFC, LUTCF, NSSA®
Certified Financial Fiduciary®
2024 Tax Tables and Tax Rates
There were still seven federal income tax brackets for
2024. The lowest of the seven tax rates is 10% and the top
tax rate is still 37%. The income that falls into each is
scheduled to be adjusted in 2025 for inflation. For 2024,
use the chart in this report to see what bracket your final
income fell into.
TAX TIP: If you are not sure how best to file, ask your tax
preparer or review IRS Publication 17, Your Federal
Income Tax, which is a complete tax resource. It contains
helpful information such as whether you need to file a tax
return and how to choose your filing status.
2024 Standard Deduction Amounts
Most taxpayers claim the standard deduction. For 2024,
the standard deduction has slightly increased. The
amounts are now $14,600 for single filers and $29,200 for
those filing jointly ($21,900 for head of household filers).
If you are filing as a married couple, an additional $1,550
is added to the standard deduction for each spouse age 65
and older or blind. If you are single, an additional
deduction of $1,950 can be made.
Child Tax Credit
The Tax Cuts and Jobs Act (TCJA), allows a maximum tax
credit of $2,000 for each qualifying child.
State and Local Tax (SALT) Deduction
Under the 2017 Tax Cuts and Jobs Act (TCJA) state and
local tax deductions (SALT) remain capped at a combined
total of $10,000 (or $5,000 for married taxpayers filing
separately). This deduction limitation is set to sunset on
December 31, 2025. Unless Congress makes any changes
before this expiration date, starting in 2026, taxpayers
may have the ability to claim larger SALT deductions again.
Medical Expense Deduction
The 2024 threshold for deducting medical expenses
remained at 7.5% of your AGI. You must itemize your
deductions to deduct these medical expenses. The IRS
website,
www.IRS.gov,
provides
a long
list
of
expenses that qualify as "medical expenses," so it can be a
good idea to keep track of yours if you think they may
qualify.
Investment Income
Long-term capital gains are taxed at more favorable rates
compared to ordinary income. For qualified dividends,
investors will continue to be taxed at 0, 15% or 20%.
One tax strategy is to review your investments with
unrealized long-term capital gains and sell enough of the
appreciated investments to generate enough long-term
capital gains to push you to the top of your federal income
tax bracket. This strategy could be helpful if you are in the
0% capital gains bracket and do not have to pay any
federal taxes on this gain. Then, if you want, you can buy
back your investment the same day, increasing your cost
basis in those investments. If you sell them in the future,
the increased cost basis will help reduce long-term capital
gains. You do not have to wait 30 days before you buy back
this investment—the 30-day rule only applies to losses,
not gains.
Note: This non-taxable capital gain for federal income
taxes might not apply to your state.
TAX TIP: Remember that marginal tax rates on long-term
capital gains and dividends can be higher than expected.
The 3.8% surtax can raise the effective rate to 18.8% for
single filers with income from $200,000 to $518,900 and
23.8% for single filers with income above $518,900 in
2024. It can raise the effective rate to 18.8% for married
taxpayers filing jointly with income from $250,000 to
$583,750 and to 23.8% for married taxpayers filing jointly
with income above $583,750.
Calculating Capital Gains and Losses
With the different tax rates for different types of gains and
losses in your marketable securities portfolio, it is
probably a good idea to familiarize yourself with some of
the ordering rules:
• Short-term capital losses must first offset short-term
capital gains.
• Long-term capital losses must first offset long-term
capital gains.
• If there are net short-term losses, they can be used to
offset net long-term capital gains.
• If there are net long-term losses, they can be used to
offset net short-term capital gains.
• If all gains and losses net to an overall loss, up to $3,000
can offset ($1,500 if married filing separately) ordinary
income.
• Remaining unused capital losses can be carried forward
to later tax years and then considered in the same
manner as described above.
TAX TIP: Please remember to look at your 2023 income tax
return Schedule D (page 2) to see if you have any capital
loss carryover from 2023. This is often overlooked,
especially if you are changing tax preparers.
Please double-check your capital gains or losses. If
you sold an asset outside of a qualified account during
2024, you most likely incurred a capital gain or loss. Sales
of securities showing the transaction date and sale price
are listed on the 1099 generated by the financial
institution. However, your 1099 might not show the
correct cost basis or realized gain or loss for each sale. You
will need to know the full cost basis for each investment
sold outside of your qualified accounts, which is usually
what you paid for it, but this is not always the case.
3.8% Medicare Investment Tax
The year 2024 is the twelfth year of the net investment
income tax of 3.8%. It is also known as the Medicare
surtax. If you earn more than $200,000 as a single or head
of household taxpayer, $125,000 as married taxpayers
filing separately or $250,000 as married joint return filers,
then this tax applies to either your modified adjusted gross
income or net investment income (including interest,
dividends, capital gains, rentals, and royalty income),
whichever is lower. This 3.8% tax is in addition to capital
gains or any other tax you already pay on investment
income.
It is helpful to pay attention to timing, especially if your
income fluctuates from year to year or is close to the
$200,000 or $250,000 amount. Consider realizing capital
gains in years when you are under these limits. The
inclusion limits may penalize married couples, so realizing
investment gains before you tie the knot may help in some
circumstances. This tax makes the use of depreciation,
installment sales, and other tax deferment strategies
suddenly more attractive.
Medicare Health Insurance Tax on Wages
If you earn more than $200,000 in wages, compensation,
and self-employment income ($250,000 if filing jointly, or
$125,000 if married and filing separately), the Affordable
Care Act levies a special additional 0.9% tax on your wages
and other earned income. You’ll pay this all year as your
employer withholds the additional Medicare Tax from
your paycheck. If you’re self-employed, plan for this tax
when you calculate your estimated taxes.
If you’re employed, there’s little you can do to reduce the
bite of this tax. Requesting non-cash benefits in lieu of
wages won’t help—they’re included in the taxable
amount. If you’re self-employed, you may want to take
special care in timing income and expenses (especially
depreciation) to avoid the limit.
Charitable Gifts and Donations
For 2024, the rules remain that taxpayers can only deduct
charitable contributions if they itemize their tax
deductions on Schedule A. Through 2025, the 60% of AGI
ceiling on charitable cash contributions
remains unchanged but is scheduled to
revert to 50% thereafter.
To qualify for the 60% limitation, the
charitable gift must be cash (or cash
equivalent) made to a qualified charity
(501(c)(3)). To qualify, this contribution
2024 Long-Term Capital Gains Tax Rates
Tax Rate
Single Filer
Head of Household
Married Filers
0%
$47,025 or less
$63,000 or less
$94,050 or less
15%
$47,026 – $518,900
$63,001 - $551,350
$94,051 - $583,750
20%
$518,901 +
$551,351 +
$583,751 +
should have been made on or before December 31, 2024.
When preparing your list of charitable gifts, remember to
review your bank account so you do not leave any out.
Everyone remembers to count the monetary gifts they
make to their favorite charities, but you should
count noncash donations as well. Make it a priority to
always get a receipt for every gift. Keep your receipts. If
your contribution totals more than $250, you will also
need an acknowledgment from the charity documenting
the support you provided. Remember that you will have to
itemize to claim this deduction, but when filing, the
expenses incurred while doing charitable work often are
not included on tax returns.
You can’t deduct the value of your time spent
volunteering, but if you buy supplies for a group, the cost
of that material is deductible as an itemized charitable
donation. You can also claim a charitable deduction for the
use of your vehicle for charitable purposes, such as
delivering meals to the homebound in your community or
taking your child’s Scout troop on an outing. For 2024, the
IRS will let you deduct that travel at .14 cents per mile.
Child and Dependent Care Credit
Millions of parents claim the child and dependent care
credit each year to help cover the costs of after-school
daycare while working. Some parents overlook claiming
the tax credit for childcare costs during the summer. This
tax break can also apply to summer day camp costs. The
key is that for deduction purposes, the camp can only be a
day camp, not an overnight camp.
In 2024, if you paid a daycare center, babysitter, summer
camp, or other care provider to care for a qualifying child
under age 13 or a disabled dependent of any age,
depending on your income you may qualify for a tax credit
of up to 50% of qualifying expenses of $3,000 for one child
or dependent, or up to $6,000 for two or more children.
Contribute to Retirement Accounts
The SECURE Act allowed people with earned income to
make contributions to Traditional IRAs past the age of 70½
starting in 2020.
If you have not already funded your retirement account for
2024, consider doing so by Tuesday, April 15, 2025. That’s
the deadline for contributions to a traditional IRA
(deductible or not) and a Roth IRA. However, if you have a
Keogh or SEP and get a filing extension by October 15, 2025,
you can wait until then to put 2024 contributions into those
accounts. To start tax-advantaged growth potential as
quickly as possible, however, try not to delay in making
contributions. If eligible, a deductible contribution will help
you lower your tax bill for 2024 and your contributions can
grow tax deferred.
To qualify for the full annual IRA deduction in 2024, you
must either: 1) not be eligible to participate in a company
retirement plan, or 2) if you are eligible, there is a phase-
out from $77,000 to $87,000 of MAGI for singles and from
$123,000 to $143,000 for married taxpayers filing jointly.
If you are not eligible for a company plan but your spouse
is, your traditional IRA contribution deduction is phased
out from $230,000 to $240,000. For 2024, the maximum
IRA contribution you can make is $7,000 ($8,000 if you are
age 50 or older by the end of the calendar year). For self-
employed persons, the maximum annual addition to SEPs
and Keoghs for 2024 is $69,000.
Although contributing to a Roth IRA instead of a traditional
IRA will not reduce your 2024 tax bill (Roth contributions
are not deductible), it could be the better choice because
all qualified withdrawals from a Roth can be tax-free in
retirement. Withdrawals from a traditional IRA are fully
taxable in retirement. To contribute the full $7,000
($8,000 if you are age 50 or older by the end of 2024) to a
Roth IRA, you must have MAGI of $146,000 or less a year
if you are single or $240,000 if you are married and file a
joint return. If you have any questions on retirement
contributions, please call us.
Roth IRA Conversions
A Roth IRA conversion is when you convert part or all of
your traditional IRA into a Roth IRA. This is a taxable event.
The amount you converted is subject to ordinary income
tax. It might also cause your income to increase, thereby
subjecting you to the Medicare surtax. Roth IRAs grow
tax-free and qualified withdrawals are
tax-free in the future, a time when tax
rates might be higher.
Whether to convert part or all of your
traditional IRA to a Roth IRA depends
on your particular situation. It is best to
prepare a tax projection and calculate
the appropriate amount to convert.
Retirement Plan
2024 Limit
Elective deferrals to 401(k), 403(b), 457(b)(2), 457(c)(1) plans
$23,000
Contributions to defined contribution plans
$69,000
Contributions to SIMPLEs
$16,000
Contributions to traditional IRAs
$7,000
Catch-up Contributions to 401(k), 403(b), 457(b)(2), 457(c)(1) plans
$7,500
Catch-up Contributions to SIMPLEs
$3,500
Catch-up Contributions to IRAs
$1,000
Remember—you do not have to convert all of your IRA to
a Roth. Roth IRA conversions are not subject to the pre-
age 59½ penalty of 10%.
Many 401(k) plan participants (if their plan allows) can
convert the pre-tax money in their 401(k) plan to a Roth
401(k) plan without leaving the job or reaching age 59½.
There are numerous pros and cons to making this change.
Please call us to see if this makes sense for you.
Required Minimum Distributions (RMD)
The SECURE Act increased the age for Required Minimum
Distributions (RMD) starting January 1, 2020, to age 72. The
SECURE 2.0 Act increased the age to start taking RMDs
further, to 73 in 2023 and to 75 in 2033.For the purposes of
tax year 2024, the Required Minimum Distributions age is
73.
Other Overlooked Tax Items and Deductions
Reinvested Dividends - This is not a tax deduction, but
it is an important calculation that can save investors a
bundle. Former IRS commissioner Fred Goldberg has
previously shared with Kiplinger magazine in their annual
overlooked deduction article that missing this break costs
millions of taxpayers a lot in overpaid taxes.
Many investors have mutual fund dividends that are
automatically used to buy extra shares. Remember that
each reinvestment increases your tax basis in that fund.
That will, in turn, reduce the taxable capital gain (or
increases the tax-saving loss) when you redeem shares.
Please keep good records. Forgetting to include reinvested
dividends in your basis results in double taxation of the
dividends—once in the year when they were paid out and
immediately reinvested and later when they are included
in the proceeds of the sale.
If you are not sure what your basis is, ask the fund
or us for help. Funds often report to investors the tax
basis of shares redeemed during the year. Regulators
currently require that for the sale of shares purchased,
financial institutions must report the basis to investors and
to the IRS.
Student-Loan Interest Paid by Parents - Generally, you
can deduct interest only if you are legally required to
repay the debt. But, if parents pay back a child's student
loans, the IRS treats the transactions as if the money were
given to the child, who then paid the debt. So, as long as
the child is no longer claimed as a dependent, the child can
deduct up to $2,500 of student-loan interest paid by their
parents each year and is subject to income limitations.
(The parents can't claim the interest deduction even
though they actually foot the bill because they are not
liable for the debt).
Helpful Tax Time Strategies
✓ Write down expenses or keep all receipts you think are
even possibly tax-deductible. Sometimes, taxpayers
assume that various expenses are not deductible and
therefore do not mention them to their tax preparer.
Don’t assume anything—give your tax preparer the
chance to tell you whether something is or is not
deductible.
✓ Be careful not to overpay Social Security taxes. If you
received a paycheck from two or more employers and
earned more than $168,600 in 2024, you may be able
to file a claim on your return for the excess Social
Security tax withholding.
✓ Don’t forget items carried over from prior years
because you exceeded annual limits, such as capital
losses, passive losses, charitable contributions, and
alternative minimum tax credits.
✓ Check your 2023 tax return to see if there was a refund
from 2023 applied to 2024 estimated taxes.
✓ Calculate your estimated tax payments for 2025 very
carefully.
Many
computer
tax
programs
will
automatically assume that your income tax liability for
the current year is the same as the prior year. This is
done to avoid paying penalties for underpayment of
estimated income taxes. However, in some cases, this
might not be a correct assumption, especially if 2024
was an unusual income tax year due to the sale of a
business, unusual capital gains, the exercise of stock
options, or even winning the lottery! A qualified tax
professional should be able to help you with a tax
projection for 2025.
✓ Remember that IRS.gov could be a valuable online
resource for tax information.
✓ Always double-check your math where possible, and
remember it is always wise to consult a tax preparer
before filing.
Proactive Tax Planning for 2025
PROACTIVE TAX PLANNING
A “Proactive” approach to your tax planning instead of a
“Reactive” approach could produce better results!
Items Taxpayers Could Consider to Proactively Tax Plan for 2025 Include:
1. Prepare a 2025 tax projection - Taxpayers already know the 2025 rates and by reviewing their 2024
situation and all 2025 expectations of income, a qualified tax professional could help them with a tax
projection for 2025.
2. New contribution limits for retirement savings - For 2025, the contribution limit for employees who
participate in 401(k), 403(b), most 457 plans, and the federal government's Thrift Savings Plan is $23,500.
The limit on annual contributions to an IRA is $7,000. The catch-up contribution limits for those 50 and over
remain unchanged at $1,000 for IRAs.
3. Starting in 2025, New “Super Catch-up contributions” for those aged 60 to 63. The SECURE 2.0 Act
allows participants of some retirement plans ages sixty to sixty-three to make “super-catch-up contributions”
of up to $11,250 or 150 percent of the regular catch-up limit.
4. Explore if a potential Roth IRA conversion is helpful for your situation - A Roth IRA can be beneficial
in your overall retirement planning. Investments in a Roth IRA have the potential to grow tax-free and they do
not have required minimum distributions during the lifetime of the original owner. Also, Roth IRA assets may
pass to your heirs income tax-free. Roth conversions include complex details and are not right for everyone.
Also, some recent proposals have suggested changes about which IRAs could be converted to ROTH IRAs.
For updates and to review if a ROTH conversion is a good idea for you, please call us.
5. Take advantage of annual exclusion gifts - For 2025, the maximum amount of gift tax exemption is
$19,000 for gifts made by an individual and $38,000 for gifts made by married couples. This means you can
give up to that amount to a family member without having to pay a gift tax. Ideas for gifting can include
contributing to a working child (or grandchild’s) IRA or gifting to a 529 plan, which is a tax-sheltered plan for
college expenses.
6. Consider bunching your charitable donations into a Donor Advised Fund (DAF) - Now is the time to
explore if it is helpful for your tax situation to deposit cash, appreciated securities or other assets in a Donor
Advised Fund, and then distributing the money to charities over time. Up to 60% of your adjusted gross income
can be deductible if given as donations to typical charities.
7. For 2025, the maximum Qualified Charitable Distribution (QCD) is $108,000 per individual. This
means that someone aged 70 1/2 or older can donate up to $108,000 directly from their IRA to a qualified
charity without having to include the amount in their taxable income.
8. Talk with us about your situation. As financial professionals, we enjoy helping clients pursue their goals.
We appreciate the opportunity to be the stewards of our client’s wealth.
Proposed Tax Policy Changes
The new administration has proposed to extend or make permanent many of the
temporary provisions from the 2017 Tax Cuts and Jobs Act (TCJA). These provisions
are currently set to expire at the end of 2025. Some of the new administration’s
proposals include:
o Maintaining the current individual tax rates, with the top tax rate being 37%.
o Maintaining the current standard deductions exemptions. The TCJA nearly doubled the
standard deduction while eliminating personal exemptions. Making these changes permanent
would simplify filing for many taxpayers and maintain the higher deduction levels.
o Increasing the Child Tax Credit and Other Dependent Credits to $5,000 and introducing a
credit for other dependents, which would continue to provide tax relief for families if made
permanent.
o Permanently raising Alternative Minimum Tax (AMT) exemption levels.
o Maintaining pass-through deductions so most businesses (i.e. partnerships or S Corps) can
take a 20% deduction off their income immediately before it passes through to their individual
tax return.
o The TCJA doubled the estate tax exemption, allowing individuals to pass on larger
estates tax-free. The new administration is proposing to make these provisions permanent,
which would mean that more individuals could transfer wealth to heirs without incurring estate
taxes, effectively reducing the tax burden on large estates.
We believe in a proactive approach to your finances.
Our goal is to update clients on any tax law changes could affect their situation!
Conclusion
Filing your 2024 taxes will continue to include the new tax
rates set forth with the Tax Cuts and Jobs Act (TCJA) enacted
in 2018 (currently set to expire after December 31, 2025). An
essential part of maintaining your overall financial health is
attempting to keep your tax liability to a minimum.
One of our primary goals is to keep clients informed of the
changes that will be affecting investors. We believe that
taking a proactive approach is better than a reactive
approach—especially regarding income tax strategies!
This information is not intended to be a substitute for specific individualized tax, legal or investment planning advice.
We suggest that you discuss your specific tax issues with a qualified tax advisor.
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Sources: www.IRS.gov, turbotax.com; Investopedia.com. Contents Provided by The Academy of Preferred Financial Advisors, Inc 2025 © All rights reserved. Reviewed by Keebler &
Associates.
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