4 Lesser-Known Ways to Lower Your Taxes in 2024

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Hate paying taxes? Read on for some tips to legally lower your IRS bill this year. [[{“value”:”

If you’re not a fan of paying taxes, you’re no doubt in good company. However, taxes are a part of life, and to an extent, they can be unavoidable.

That doesn’t mean you can’t take steps to lower your tax bill, though. Here are some tricks when filing your taxes you may not have known about.

1. Participate in a traditional IRA or 401(k)

Contributing to a retirement plan is a great way to set yourself up with extra income for the future. But it can also lower your tax burden in the present.

Contributions to an IRA or 401(k) up to a certain annual limit can exempt some of your income from taxes. This year, the limit for IRAs is $7,000 if you’re under age 50 or $8,000 if you’re 50 or older. For 401(k)s, it’s $23,000 if you’re under 50 or $30,500 if you’re 50 or older.

However, you’ll only get this benefit with a traditional IRA or 401(k). If you contribute to a Roth IRA or Roth 401(k), you’ll get tax benefits that include tax-free gains and withdrawals. But you won’t lower your 2024 taxes by contributing to a Roth retirement plan.

2. Fund an HSA

A health savings account, or HSA, is an account you contribute to on a pre-tax basis (like traditional IRAs and 401(k) plans). The money in your account can be invested if you don’t need it right away, and medical withdrawals are tax free.

Funding an HSA could exempt some of your earnings from taxes the same way IRA and 401(k) contributions do. This year, HSAs allow for contributions of up to $4,150 if you have self-only coverage and are under age 55, or up to $8,300 if you’re under 55 with family coverage. If you’re 55 or older, the limits that apply this year are $5,150 for self-only coverage or $9,300 for family coverage.

Your health plan needs to meet certain requirements for you to fund an HSA, however. For self-only coverage, you need a minimum deductible of $1,600 and an out-of-pocket maximum of $8,050 in 2024. For family coverage, you need a minimum $3,200 deductible and a $16,100 out-of-pocket maximum. You can filter by HSA-eligible plans on Healthcare.gov or ask your plan sponsor for more information about eligible plans.

3. Donate to charity

Being charitable isn’t just good for the soul; it can also be good for your tax bill. If you donate money to a registered charity, you’re allowed to claim it as a tax deduction.

You can also take a deduction for donated goods, whether it’s gently used clothing, toys, or furniture. However, in that case, you’ll need a detailed receipt, and you should plan to work with a tax professional to determine what deduction to claim.

When donating goods, you can’t deduct their original value. Rather, you’re looking at a deduction for their fair market value — what they’re worth based on their condition at the time of your donation.

You should also know that you must itemize on your tax return to claim a deduction for charitable donations. If you claim the standard deduction, you won’t get a tax break for giving to charity — though it’s still, of course, a nice thing to do.

4. Donate your required minimum distribution

If you have a traditional IRA or 401(k) plan and you’re 73 years old, you’re forced to take withdrawals, known as required minimum distributions (RMDs), from your account every year. (Note that the age for RMDs will increase to 75 in 2033.)

Normally, those RMDs are taxable, and they could lift you into a higher tax bracket. However, one thing you’re allowed to do is arrange for your RMD to go directly to a registered charity. If you do so, your RMD won’t trigger a tax bill for you.

There’s no reason to pay the IRS any more money than you’re required to. Use these tips to lower your tax bill this year — and, if applicable, in future years as well.

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