As the hot weather kicks in this summer, now is an opportune time to explore proactive tax strategies that can help manage your 2025 tax liabilities and lead to a refund. Planning with these cool tax tips can help you maximize 2025 tax deductions and credits.
Tip #1- Adjust payroll withholding
One of the simplest ways to minimize tax liability and work toward a tax refund is by adjusting your withholding on your W-4. Consider increasing your withholdings if you received a hefty tax bill the previous year. This way, more taxes will be taken out of your paycheck throughout the year, increasing your chances of obtaining a refund.
Tip #2- Maximize retirement contributions
Contributing more to tax-advantaged retirement accounts, such as a 401(k) or an Individual Retirement Account (IRA), reduces one’s taxable income, which could lead to a larger refund. For 2025, try contributing as much as possible to these accounts up to the annual limit.
Tip #3- Leverage educational expenses
The American Opportunity Tax Credit can help maximize one’s tax credits if a family member attends and pays for college. This credit helps offset education costs by deducting tuition invoices and receipts for books, equipment, and supplies, as these can qualify for tax credits. It’s essential to save all qualifying receipts to be eligible for these credits.
Tip #4- Make charitable contributions
Donating to qualified non-profit entities is a win-win situation; it helps out a charity, and the donation amount can be deducted from income taxes. Obtain a written acknowledgment from each organization verifying the donation amount for tax record-keeping purposes.
Tip #5- Capitalize on home ownership
Homeownership may qualify for several tax benefits. Mortgage interest, property taxes (in some jurisdictions), and specific home improvements may be deducted. Check with a financial or tax professional to ensure these deductions apply to your situation.
Tip #6- Leverage a Health Savings Account (HSA) or Flexible Spending Account (FSA)
Contributions to these accounts are made pre-tax. Thus, the more one contributes, the lower one’s taxable income. Medical expenses not covered by insurance may also be deducted depending on one’s income.
The above strategies may position you to take advantage of the key tax benefits in 2025. However, everyone’s tax situation is different, so it’s essential to consult with financial and tax professionals.
Strategically reduce tax liability
Remember, the goal isn’t just to get through tax season but to plan strategically to reduce tax liability and work toward receiving a 2025 refund.
SWG4558022-0625b This information is provided as general information and is not intended to be specific financial guidance. Before you make any decisions regarding your personal financial situation, you should consult a financial or tax professional to discuss your individual circumstances and objectives.
In addition, at Centennial Wealth Strategists we know whether you are planning on growing your retirement assets or protecting them for your family, we will take the time to get to know you to help ensure that you’re equipped with a plan that’s tailored to your unique situation. With Centennial Wealth Strategists, you get the benefit of veteran advisors and technology working for you. It’s the best of both worlds. Contact us today to schedule an introductory meeting.
