Setting yourself up for tax success is crucial, especially as we move closer to 2026. With frequent changes in tax legislation, it’s vital to stay informed, read carefully, and consult a professional if needed.

Experts have shared their top, cost-effective tax strategies:

BOOST YOUR CHARITABLE CONTRIBUTIONS

Charitable donations saw a decline in 2023, marking the lowest levels of giving in nearly three decades. This decline is largely attributed to the Tax Cuts and Jobs Act, which significantly raised the “standard deduction” amount individuals can deduct from their taxable income. Before these changes, many opted to itemize deductions, tallying up various eligible expenses to exceed the previously lower standard deduction. Post-2017, fewer people find it beneficial to itemize.

For the 2024 tax year, the standard deduction will be $14,600 for single filers (a $750 increase from 2023) and $29,200 for married couples filing jointly (a $1,500 increase). If your itemized deductions don’t surpass these thresholds, you may want to reconsider your strategy. A newer approach involves grouping donations into a single year, allowing you to exceed the standard deduction and making itemization worthwhile.

This method encourages making larger charitable gifts every few years, enabling you to maximize tax benefits in those years. This technique, often referred to as “batching” or “bundling,” is worth discussing with your accountant to ensure you’re optimizing your contributions.

CONSIDER A SEP IRA IF SELF-EMPLOYED

If you launched a new business last year, congratulations! For the self-employed, planning for retirement is key. A SEP IRA is often recommended over a Roth IRA because it allows for higher annual contributions. For the 2023 tax year, contributions can reach 25% of your gross annual salary, with a cap of $66,000. This cap increases to $69,000 in 2024. Additionally, you can contribute until tax day, April 15, 2024.

STAY IN SCHOOL OR RETURN FOR GRADUATE STUDIES

If you’re contemplating graduate school, now may be the perfect time. Earning under $90,000 annually can qualify you for tax breaks that ease the financial burden. The lifetime learning tax credit (LLTC) covers tuition and related costs for various degree programs. This credit is particularly beneficial for graduate studies and continuing education.

However, be aware that the LLTC phases out for single taxpayers earning between $80,000 and $90,000.

UTILIZE THE OFFICE-IN-HOME DEDUCTION

For those running a business from home, it’s important to understand the office-in-home deduction, applicable mainly to sole proprietors or self-employed individuals. When utilized correctly, this deduction can be significant. Ensure that the space you claim is used exclusively for business activities, such as managing records or client meetings.

This deduction encompasses all costs associated with your home office. You can calculate it in two ways: by determining the percentage of your home’s square footage dedicated to work and applying that percentage to your overall housing expenses, or opting for the simplified method that allows you to deduct $5 per square foot, up to 300 square feet (approximately 17 by 17 feet). While the simplified method reduces paperwork, it may yield a lower deduction, so it’s wise to compare both options before filing.