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Yahoo
15-04-2025
- Business
- Yahoo
Finish your 2024 tax return? Before filing it away, use it to plan for 2025 and save money
It's April 15, so you think you're done with taxes for another year? Not so fast. Before you put your tax documents into storage, use your 2024 return to help you plan for 2025 taxes next year, experts say. A little work now can put some money in your pocket and ensure filing goes smoothly on the next go round. 'Filing your taxes can feel like a beast. A lot of us put it off because it's confusing or stressful — and then we rush it, miss out on money, or skip it altogether,' said Carrie Joy, chief executive of WorkMoney. Because people "just finished their 2024 tax know in real time what they liked and did not like about their tax return experience, results and outcome and have time to make change for the next time," said Mark Steber, chief tax officer at Jackson Hewitt. To help ease the pain next year, experts said, consider taking some of the steps outlined below. If you owed money, look to see if there was a penalty for underpayment of estimated tax. If you ended up paying a penalty, think about increasing withholding or paying quarterly estimated tax payments to avoid it next time. If you had a large refund, consider reducing withholding. A refund basically is an interest free loan to the government. However, some taxpayers like large refunds to avoid bigger paychecks that will tempt them to spend more throughout the year. 'If you didn't have the tax outcome you were hoping for or had a life change like (you) got a new job, had a baby, or bought a house, it's time to review and possibly adjust your withholding from your paycheck,' said Lisa Greene-Lewis, spokesperson and certified public accountant for TurboTax. TurboTax has a free W-4 withholding calculator to figure out how much you should have withheld on each paycheck whether you want a bigger refund, or you want to assure you don't owe. If you set a withholding amount, know that you're not wed to it all year. "Most taxpayers can adjust their withholdings as often as they want to ensure their take-home pay and ultimately tax refund size best suits their individual needs, savings goals and tax return outcome results whatever they may be," Steber said. Look at your investments. If you sold some investments early in the year to lock in gains to avoid the stock market declines, consider selling losers to realize a loss to offset capital gains, said Richard Pon, certified public accountant in San Francisco. If you always make your IRA contribution after year-end in April, consider making your 2025 IRA contribution now. "With stock prices low today, you may be buying at the bottom instead of at a higher price next April," Pon said. Note: There's a bonus for some older adults this year. In 2025, for the first time, Americans ages 60 to 63 by the end of the calendar year have an opportunity to rev up their retirement savings with a supersized catch-up contribution that can help reduce taxable income on next year's taxes. If you have a business, don't forget to track business mileage throughout the entire year, experts said. If you are an employee, don't forget unreimbursed business expenses are still not tax deductible in 2025. Ask your employer if they can reimburse you for out-of-pocket expenses such as uniforms, small tools, professional subscriptions or business meals. Spring home buying season's starting. Keep in mind these related tax issues: If you sell your home, don't forget to document improvements to help you reduce any gains. Also, if you owned and used a home as your principal residence for 2 out of the last 5 years (through date of sale, not tax years), you're eligible for a $250,000 gain exclusion ($500,000 married). If you're buying a home, look out for state specific rules on housing deductions. The federal mortgage interest deduction is limited to $750,000. California mortgage interest is limited to $1 million plus $100,000 home equity indebtedness. If you move to North Carolina, the combined deduction for mortgage interest and property taxes is limited to $20,000 'To get organized for 2025 taxes, start in 2025 not in 2026,' Pon said. Anytime you make a tax-deductible expense, track it on a spreadsheet or simply put away the receipt in a folder, Pon said. The most common items are charitable contributions, property taxes and medical expenses. Ask your accountant if it's worth tracking medical expenses. For federal purposes, medical expenses must exceed 7.5% of adjusted gross income but certain states do not have this 7.5% floor. 'Organizing documents throughout the year helps ensure you don't miss any deductions when it comes to tax season,' Greene-Lewis said. She reminds families to keep receipts for items that may be deductible or that you may be able to receive a credit for such as a child's day care or summer camp. There are also education-related credits and deductions people can take, Joy said. For example, student loan interest is deductible, and the American opportunity tax credit is a credit for qualified education expenses paid for an eligible student for the first four years of higher education. 'Similarly, landlords should track their expenses during the year instead of gathering them next year when your memory may be a little forgetful,' Pon said. Create a folder for rental expenses such as insurance, management fees, homeowners' association fees, utilities and repair expenses. "It's easier to organize throughout the year than all at once," Steber said. "A lot of folks think they won't get much — but tax credits and deductions can lead to a big refund," Joy said. If tax season was confusing this year or you're new to filing, take some time to review important tax lingo so tax parlance becomes second nature. 'Understanding a few key words can go a long way,' Joy said. Once you know the lingo, you'll be more tax aware throughout the year and then, have a jumpstart when you file your next return. Refund - Money back from the government Deduction - Lowers how much of your income gets taxed (like student loan interest) Credit - Lowers how much you owe directly (like the Earned Income Tax Credit) Rebate - A special kind of refund or tax break Medora Lee is a money, markets, and personal finance reporter at USA TODAY. You can reach her at mjlee@ and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday. This article originally appeared on USA TODAY: How to prepare for next year's tax season to save money Sign in to access your portfolio
USA Today
15-04-2025
- Business
- USA Today
Finish your 2024 tax return? Before filing it away, use it to plan for 2025 and save money
Finish your 2024 tax return? Before filing it away, use it to plan for 2025 and save money Show Caption Hide Caption Tax status changing? Here's what to know about filing this year Tax season gives many people anxiety. Here's what we know about filing this year. It's April 15, so you think you're done with taxes for another year? Not so fast. Before you put your tax documents into storage, use your 2024 return to help you plan for 2025 taxes next year, experts say. A little work now can put some money in your pocket and ensure filing goes smoothly on the next go round. 'Filing your taxes can feel like a beast. A lot of us put it off because it's confusing or stressful — and then we rush it, miss out on money, or skip it altogether,' said Carrie Joy, chief executive of WorkMoney. Because people "just finished their 2024 tax know in real time what they liked and did not like about their tax return experience, results and outcome and have time to make change for the next time," said Mark Steber, chief tax officer at Jackson Hewitt. To help ease the pain next year, experts said, consider taking some of the steps outlined below. Examine your payment or refund If you owed money, look to see if there was a penalty for underpayment of estimated tax. If you ended up paying a penalty, think about increasing withholding or paying quarterly estimated tax payments to avoid it next time. If you had a large refund, consider reducing withholding. A refund basically is an interest free loan to the government. However, some taxpayers like large refunds to avoid bigger paychecks that will tempt them to spend more throughout the year. 'If you didn't have the tax outcome you were hoping for or had a life change like (you) got a new job, had a baby, or bought a house, it's time to review and possibly adjust your withholding from your paycheck,' said Lisa Greene-Lewis, spokesperson and certified public accountant for TurboTax. TurboTax has a free W-4 withholding calculator to figure out how much you should have withheld on each paycheck whether you want a bigger refund, or you want to assure you don't owe. If you set a withholding amount, know that you're not wed to it all year. "Most taxpayers can adjust their withholdings as often as they want to ensure their take-home pay and ultimately tax refund size best suits their individual needs, savings goals and tax return outcome results whatever they may be," Steber said. Take advantage of the weak stock market Look at your investments. If you sold some investments early in the year to lock in gains to avoid the stock market declines, consider selling losers to realize a loss to offset capital gains, said Richard Pon, certified public accountant in San Francisco. If you always make your IRA contribution after year-end in April, consider making your 2025 IRA contribution now. "With stock prices low today, you may be buying at the bottom instead of at a higher price next April," Pon said. Note: There's a bonus for some older adults this year. In 2025, for the first time, Americans ages 60 to 63 by the end of the calendar year have an opportunity to rev up their retirement savings with a supersized catch-up contribution that can help reduce taxable income on next year's taxes. Business expenses for employees and owners If you have a business, don't forget to track business mileage throughout the entire year, experts said. If you are an employee, don't forget unreimbursed business expenses are still not tax deductible in 2025. Ask your employer if they can reimburse you for out-of-pocket expenses such as uniforms, small tools, professional subscriptions or business meals. Buying or selling a home? Spring home buying season's starting. Keep in mind these related tax issues: If you sell your home, don't forget to document improvements to help you reduce any gains. Also, if you owned and used a home as your principal residence for 2 out of the last 5 years (through date of sale, not tax years), you're eligible for a $250,000 gain exclusion ($500,000 married). If you're buying a home, look out for state specific rules on housing deductions. The federal mortgage interest deduction is limited to $750,000. California mortgage interest is limited to $1 million plus $100,000 home equity indebtedness. If you move to North Carolina, the combined deduction for mortgage interest and property taxes is limited to $20,000 Get organized 'To get organized for 2025 taxes, start in 2025 not in 2026,' Pon said. Anytime you make a tax-deductible expense, track it on a spreadsheet or simply put away the receipt in a folder, Pon said. The most common items are charitable contributions, property taxes and medical expenses. Ask your accountant if it's worth tracking medical expenses. For federal purposes, medical expenses must exceed 7.5% of adjusted gross income but certain states do not have this 7.5% floor. 'Organizing documents throughout the year helps ensure you don't miss any deductions when it comes to tax season,' Greene-Lewis said. She reminds families to keep receipts for items that may be deductible or that you may be able to receive a credit for such as a child's day care or summer camp. There are also education-related credits and deductions people can take, Joy said. For example, student loan interest is deductible, and the American opportunity tax credit is a credit for qualified education expenses paid for an eligible student for the first four years of higher education. 'Similarly, landlords should track their expenses during the year instead of gathering them next year when your memory may be a little forgetful,' Pon said. Create a folder for rental expenses such as insurance, management fees, homeowners' association fees, utilities and repair expenses. "It's easier to organize throughout the year than all at once," Steber said. "A lot of folks think they won't get much — but tax credits and deductions can lead to a big refund," Joy said. Speak the language If tax season was confusing this year or you're new to filing, take some time to review important tax lingo so tax parlance becomes second nature. 'Understanding a few key words can go a long way,' Joy said. Once you know the lingo, you'll be more tax aware throughout the year and then, have a jumpstart when you file your next return. Refund - Money back from the government Deduction - Lowers how much of your income gets taxed (like student loan interest) Credit - Lowers how much you owe directly (like the Earned Income Tax Credit) Rebate - A special kind of refund or tax break Medora Lee is a money, markets, and personal finance reporter at USA TODAY. You can reach her at mjlee@ and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday.
