The Super Bowl seems to turn into a bigger deal every single year. Not just the cost of commercials, which are astronomical, but also all the lead-up to it. The Pro Bowl, the player interviews, the photo shoots, the practices, the celebrity appearances, the glitz and glam. The NFL sure knows how to put on a show.
But what you probably never, ever think about when you watch the biggest U.S. sporting event of the year is how much someone is paying in taxes. Well, Floyd Mayweather let everyone know after paying his 18 million tax bill he invested a million dollars to take 34 people to the Super Bowl.
While what he paid in taxes is staggering to most Chattanooga people, he still most likely had a team of accountants helping him make smart moves with his money to reduce that burden.
REMEMBER, it is now tax filing season, and we’re already halfway into February. April 15th might seem far away, but it’ll be here in a blink. Make sure you get an appointment scheduled with us so we can take care of your tax prep:
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And once we’ve seen where things are at for 2023, we can also help you make better decisions for 2024. Another way to do that is knowing the adjusted tax brackets for 2024 and the moves you can make NOW with those in mind.
How Chattanooga Taxpayers Can Craft Their 2024 Tax Planning Strategy
“It’s not about the money. It’s about how you can use that money to turn your life and the lives around you into something you’re proud of.” – Tony Robbins
When tax filing season comes, you’re probably only thinking about last year’s taxes. It’s the time where you either get happy about refunds coming your way or you groan over what you owe. And, generally speaking, the tax savvy moves you could have made in 2023 aren’t really an option anymore.
When you’re faced with a tax bill or realize you could have gotten more money back is when you realize a little foresight can go a long way.
That’s why I want to dive into the adjusted federal income tax brackets for 2024 and how you can utilize that knowledge for tax planning strategy purposes.
Pay attention to the federal income tax brackets
The federal income tax brackets lay out the roadmap for what portion of your income will be taxed at which rate. For 2024, the IRS raised income thresholds for tax brackets to combat inflation, allowing taxpayers to earn more before hitting higher tax rates.
For example, the 10 percent bracket extends to 11,600 for singles, up from 2023’s 11K, and the top 37 percent rate now starts at 609,350 for singles, an increase from 578,126. The standard deduction also increased by 5.4 percent, offering greater initial tax relief.
Coming up with a tax planning strategy that saves you money
Now that you have a grid for the updated 2024 tax brackets you can start figuring out some tax planning strategy to help you reduce your tax burden, maybe even get more in your pocket. There are ways to lower what you owe or land you in a cheaper tax bracket.
So, where are some areas you can make choices now so you keep more money in your pocket? Let’s look at some:
Income shifting: Sometimes, it’s beneficial to slow down and let some of your income fall into the next year, especially if you’re right at the edge of a higher tax bracket. This can be as simple as deferring a year-end bonus or accelerating deductions as part of your tax planning strategy.
Retirement contributions: Increasing your retirement savings across accounts like 401(k)s and IRAs is a dual-benefit move. For 2024, if you pump up your 401(k) contributions to the max, say around 23K, plus an additional catch-up amount for those 50 or older, you’re effectively reducing your taxable income right now.
The same goes for Traditional IRAs, where hitting the limit (around 6K, plus a 1K catch-up for the 50-plus crowd) can offer an immediate tax deduction.
While Roth IRAs don’t lower your taxable income today, they set you up for tax-free growth and withdrawals down the line. By strategically maxing out these contributions, you’re potentially lowering your current tax bracket, so you can save this year.
Capital gains and losses: Knowing when to harvest your investments can make a big difference in your tax bill. It’s about picking the right moment to sell, ensuring you’re in a lower tax bracket to minimize capital gains taxes as part of a smart tax planning strategy.
Let’s put some of these into perspective…
Imagine you’re considering selling some stock. By waiting a year when your income is lower, you could significantly reduce the amount of tax owed on the gains.
Or perhaps you’re debating a large retirement contribution. By making the contribution, you not only save for your future, but you also might drop into a lower bracket, reducing your current liability as a result of your tax planning strategy.
A few warnings
Is tax planning one-size-fits-all? That’s a big NO. Your financial situation is unique to you, and your tax strategy should be just as personalized. Now, these general savings concepts I’ve discussed here should get you started, but make sure you get help from a tax professional who can help you make the right plan for you.
They’ll help you avoid the common missteps others make like overlooking taxable income sources or not fully understanding how different types of income are taxed.
And, they’ll set you up for long-term success.
If you’re ready to explore strategies tailored to your unique financial landscape, we’re here to light the way.
I’m happy to be that tax professional in your corner. Though I’m working hard on 2023 tax filing, helping Hamilton County clients make tax savvy moves for next year is also an important part of my role. I love helping people with tax planning strategy.
Let’s discuss this at your next tax appointment:
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To being more tax savvy in 2024,
John and Wanda King
