February 13, 2025

Tax season can be overwhelming, but with the right strategies, you can optimize your tax return and keep more money in your pocket. As a CPA, I work with the Financial Advisors at Brighton Securities to help our clients navigate the complexities of alleviating the tax burden on their investments and develop tax efficient investment strategies. Whether you're looking to maximize your refund or minimize what you owe, these tips will help jumpstart you to take control of your financial future.

1. Maximize Your Deductions and Credits

Deductions and credits reduce your taxable income and the amount of tax you owe, respectively. Consider the following:

  • Standard vs. Itemized Deductions: The standard deduction is often the easiest choice, but if your itemized deductions exceed this amount, itemizing can potentially save you more.
  • Common Deductions: Mortgage interest, student loan interest, medical expenses (if they exceed a percentage of income), and state/local taxes paid.
  • Tax Credits to Leverage: Earned Income Tax Credit (EITC), Child Tax Credit, and Education Credits (Lifetime Learning Credit or American Opportunity Credit).

2. Contribute to Retirement Accounts

  • Contributions to a 401(k) or Traditional IRA can lower your taxable income, reducing your overall tax bill.
    • If eligible, consider a Roth IRA for tax-free withdrawals in retirement.
  • Self-employed individuals can leverage Simple IRAs, SEP IRAs and Solo 401(k)s for greater contributions and deductions.

3. Take Advantage of Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs)

  • HSAs offer triple tax advantages: tax-deductible contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses.
  • FSAs allow you to use pre-tax dollars for medical expenses but must be used within the plan year, such as dependent care benefits.

4. Optimize Your Withholding

  • Adjusting your W-4 ensures the right amount of taxes is withheld from your paycheck. Too much withholding results in an interest-free loan to the government, while too little can lead to a tax bill.
  • Use the IRS withholding calculator to ensure you’re on track.

5. Leverage Capital Gains Strategies

  • Tax-Loss Harvesting: Offset capital gains by selling underperforming investments.
  • Long-Term vs. Short-Term Gains: Holding investments for over a year results in lower capital gains tax rates compared to short-term holdings.
  • Consider a 1031 Exchange for real estate investments to defer capital gains taxes.
  • Capital Gains Harvesting to take advantage of 0% Capital Gains Tax while income may be low in a particular year.

6. Small Business & Side Hustle Deductions

  • If you own a business or have a side hustle, deduct expenses like home office costs, internet, business travel, and professional fees.
  • Consider setting up an LLC or S-Corp

7. Education & Student Loan Tax Benefits

  • Deduct up to $2,500 in student loan interest.
  • Use 529 Plans to save for education tax-free. Leftover funds in these plans can now be converted over to a ROTH IRA up to $35k.  
  • Leverage the Lifetime Learning Credit or American Opportunity Credit to offset tuition expenses.

8. Charitable Contributions

  • Donations to qualified charities can be deducted if you itemize.
  • Donating appreciated stock instead of cash provides a double tax benefit: avoiding capital gains tax and claiming the full donation amount.

9. Stay Organized & Plan Ahead

  • Keep receipts, track expenses, and maintain proper documentation to support deductions.
  • Work with a tax professional or financial advisor to ensure you're taking advantage of all available tax-saving strategies.

By proactively implementing these strategies into your financial plan, you may keep more of your hard-earned money. If you’d like personalized guidance tailored to your financial situation, reach out today to start maximizing your savings and securing your financial future!

CONTACT BRIGHTON SECURITIES TAX & ACCOUNTING