How Do I Reduce My Taxes in 2025?
You’re probably like most of the rest of the country today, working on your personal taxes, and looking forward to moving on with your life! This is the perfect time, however, to start thinking about reducing/limiting your taxable income for the current year.
This is particularly true for those who expect that they may be on the short end of the tax payment stick by the end of the year. Fortunately, the tax code offers some powerful ways to save on taxes. It’s always worth maxing out your pretax retirement contributions. For example, if you are self-employed, you can set aside 25% of your total compensation, up to $70,000, into a SEP-IRA account. For 401(k) and 403(b) retirement programs, the maximum contribution in 2025 is $23,500 (plus another $7,500 for people over 50 yr—the special provision of the tax code that allows people to “catch up” in their retirement savings).
If you use a high-deductible health plan, you can save on your taxes by opening a health savings account, with pretax contributions of up to $4,300 for individuals and $8,550 for families.
Are you or your family receiving a significant reimbursement check on your 2024 taxes? If so, consider this: If you received a $6,000 IRS payment, that is equivalent to having $500 per month that could have gone towards your pretax contributions in 2024. This money would have been working for you instead of providing a loan to the federal government.
These are just some of the tax strategies that can optimize your savings through automatic payroll deductions. If I were to make one emphatic point in this article, it would be the following: Don’t assume that the amount of money removed automatically from your paycheck should be left as is. An accountant or bookkeeper may not recommend any changes to your paycheck deductions, but that professional is not necessarily considering any potential tax advantages to you.
Financial advisors like Isakov Planning Group specialize in analyzing your personal situation and how you may benefit from adjusting your payroll deductions. This means understanding your financial goals and your current economic status, and looking at how you can reduce your tax obligations for the current year. In other words, we want your money to be “stickier,” for your specific purposes and goals.
If you want more recommendations on how you can start addressing your 2025 tax liability today, call Isakov Planning Group. We’ll review your current financial picture and match our tax-planning tools to your specific needs. Contact us today!