We are into 2025, and the tax-filing season is open.
Our firm has begun preparing both business and personal tax returns for 2024. However, despite the calendar year changing to a new year, there are still opportunities for taxpayers to reduce their 2024 income tax obligation. Being aware of these tax-savings opportunities and taking advantage of those that may be applicable for the particular taxpayer can help reduce the tax burden when the returns are ultimately filed.
One opportunity for those who are covered by a qualifying high deductible health insurance plan is to contribute to a Health Savings Account. The HSA limit is $4,150 for single coverage for the year and $8,300 for family coverage. Those taxpayers who are 55 and older can also make an additional $1,000 catchup contribution. This contribution must be made by April 15, 2025, for the 2024 tax year. If the employer has already made contributions on behalf of the employee, the additional amount that the employee can contribute is limited by these amounts. It is important to review the health insurance coverage and months under the coverage to properly determine the limits for a deductible HSA contribution as this can vary based on the specific circumstances.
Another opportunity to potentially reduce the 2024 tax obligation is to make a retirement contribution for 2024. If the taxpayer and spouse are not covered by a retirement plan through work, then they can each potentially contribute to a deductible individual retirement account for 2024.
The IRA contribution limits for 2024 are $7,000 for a taxpayer under 50 and $8,000 for those taxpayers aged 50 and older. It is important for a taxpayer to determine their eligibility for these types of retirement contributions as there are restrictions if the taxpayer or spouse is covered through a retirement plan from their employer. There are also restrictions based on income as well.
Likewise, if a taxpayer is self-employed, they have a much higher amount that they can possibly contribute to a retirement plan by using a plan such a SEP IRA, Solo 401K plan or Keogh plan. Depending on the type of plan that the individual chooses to put in place and the amount of their income, there can be significant contributions to these types of retirement plans. The traditional IRA plans are also available to self-employed individuals, but these other types of retirement plans offer a larger deferral option and therefore potential larger tax-savings opportunities.
Another lesser known and newer tax savings opportunity available to Ohio taxpayers is to contribute to the Ohio Angel Scholarship Fund. In 2024 the State of Ohio extended the deadline for these types of contributions to April 15 of the following year. A contribution of up to $750 per single taxpayer or $1,500 for a married couple is allowed. This contribution is a dollar-for-dollar tax credit on the taxpayer’s Ohio tax return. Find a list of the approved educational organizations to which taxpayers can contribute at www.charitable.ohioago.gov.
Another strategy to save money in regard to your taxes is to file and pay your taxes on time. Many taxpayers take an extension on their taxes. However, an extension to file is not an extension to pay. It is important that 100% of the taxes are paid by the April 15 tax-filing deadline for both federal, state and local taxes. If there is a tax balance after that date, the respective taxing agency will charge a late payment penalty which can amount to a significant amount of money.
Knowing all of the potential tax-savings opportunities and working with a tax professional to identify those opportunities that may be available to the specific taxpayer will help to reduce the tax burden. In addition, these may provide ancillary benefits like increased savings for healthcare costs, retirement savings or simply helping others.
Paul Pahoresky is the managing member of PRP & Associates. He can be reached at 440-974-1040×14 or at paul@prpassoc.com. Consult your tax advisor for your specific situation for additional information and guidance on these topics.