To increase itemized deductions for a Married Filing Jointly (MFJ) tax return in 2024, focus on maximizing the following common deduction categories while ensuring compliance with IRS rules. The strategies are particularly beneficial if your itemized deductions exceed the standard deduction for MFJ (expected to be $27,700 in 2024).
1. Charitable Contributions
- Strategy:
- Donate cash, appreciated securities, or other property to qualified charities.
- Bunching contributions: If you typically make annual donations, consider “bunching” two or more years of contributions into 2024 to exceed the standard deduction threshold.
- Use a Donor-Advised Fund (DAF): Contribute a large amount in 2024, claim the deduction now, and distribute funds to charities over several years.
2. Medical and Dental Expenses
- Strategy:
- Deduct unreimbursed medical expenses that exceed 7.5% of your adjusted gross income (AGI).
- Schedule elective procedures or treatments for 2024 to maximize deductions within a single tax year.
- Track eligible expenses, including insurance premiums, out-of-pocket costs, medical mileage, and long-term care premiums.
3. State and Local Taxes (SALT)
- Strategy:
- Prepay property taxes for 2025 (if not subject to alternative minimum tax).
- Pay any state income taxes or estimated tax payments in 2024 instead of 2025.
Note: The SALT deduction limit is $10,000, which applies to state and local property taxes and either income or sales taxes combined. However, this limit could change depending on legislative updates.
4. Home Mortgage Interest
- Strategy:
- If you have mortgage debt on your primary or secondary home, ensure the debt does not exceed $750,000 (for loans originating after Dec. 15, 2017).
- Consider refinancing or consolidating debt to maximize deductible mortgage interest.
- Prepay January 2025’s mortgage payment in December 2024 to increase your 2024 deduction.
5. Investment-Related Deductions
- Strategy:
- Deduct margin interest expenses paid on investment loans, but only to the extent you have net investment income (interest, dividends, etc.).
- Plan the sale of appreciated investments in 2024 to generate taxable investment income, allowing you to deduct associated investment interest expenses.
6. Miscellaneous Itemized Deductions
- Although most were eliminated under the Tax Cuts and Jobs Act, monitor any tax law changes for 2024 that could restore deductions like unreimbursed employee expenses.
7. Other Strategies
Maximize Contributions for State-Approved Plans:
- Contributions to state-sponsored 529 plans may not be deductible federally but may offer a state tax benefit.
Energy-Efficient Home Improvements:
- Consider energy-efficient upgrades (solar panels, insulation, windows, or heat pumps) to qualify for federal tax credits while potentially increasing itemized deductions for related property taxes or loan interest.
Track and Document Expenses Thoroughly:
- Keep receipts, statements, and documentation for eligible deductions to ensure compliance and optimize the benefit during tax filing.
Example of Maximizing Itemized Deductions
Current Deductions (MFJ Example):
- State and Local Taxes (SALT): $10,000 (maxed out).
- Mortgage Interest: $7,000.
- Charitable Contributions: $5,000.
- Medical Expenses: $2,500 (assuming $100,000 AGI).
Total Itemized Deductions: $24,500 (below the standard deduction).
After Strategic Planning:
- Bunch Charitable Contributions: Donate $10,000 in 2024 instead of spreading it over two years.
- Prepay Property Taxes: Add $5,000 for 2025 taxes to 2024 payments.
- Plan Medical Expenses: Schedule elective medical procedures to add $2,000.
New Itemized Deductions: $34,500 (exceeds standard deduction by $6,800).
Consult a CPA
Consider working with Aansun CPA to ensure you’re optimizing your itemized deductions while staying compliant with IRS regulations
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