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Navigating Inflation: Effective Tax-Saving Strategies for 2024

Inflation has dropped from its peak in 2022 but remains high. Despite this, there are benefits, especially when it comes to taxes and savings.

The IRS adjusts tax brackets, deductions, and retirement savings limits based on inflation. This gives you a chance to save more for retirement, lower your taxes, and earn more without hitting a higher tax bracket. These changes, due to inflation, are likely to stay.

Tax Brackets and Multi-Year Planning

Tax brackets change with inflation to match your real income. Inflation can make tax credits and exemptions worth less, leading to higher taxes. But with wider tax brackets, more of your income stays taxed at lower rates.

Planning your income to stay in lower tax brackets can save you a lot on taxes. This involves a long-term strategy, considering all income sources and timing large taxable incomes for years when your overall income might be lower.

Think about your income sources, the tax effects of big asset sales, investment taxes, and other taxable events. The aim is to reduce taxes not just yearly, but over your lifetime, whether working or retired.

2024 Tax Brackets

Standard Deduction Increases

The federal standard deduction is up to $14,600 for singles and $29,200 for married couples. If your deductions like mortgage interest or charitable donations exceed these amounts, consider itemizing. Also, you can "bunch" several years' worth of charitable donations into one year to increase your deductions, if you tax strategy calls for itemizing deductions.

Retirement and Healthcare Savings

Retirement savings limits are up, with a maximum of $23,000, or $30,500 if you're over 50. IRA limits are now $7,000, plus an extra $1,000 if you're over 50. These higher limits help you save more and reduce taxable income.

Healthcare savings accounts also have higher limits. Flexible spending accounts allow up to $3,200 in pre-tax contributions. Health Savings Accounts (HSAs) let individuals contribute $4,150 and families $8,300, with an extra $1,000 if you're over 50. These accounts offer triple tax advantages: tax-free contributions, growth, and withdrawals for qualified expenses.

Social Security Changes

Social security benefits rose by 3.2%. The maximum benefit at full retirement age is now $3,822. There's also an earnings test for those working while receiving social security. Benefits are reduced by $1 for every $2 in income over the limit, which is $22,320.

If you’re still paying into the system, you may be paying a bit more next year. Social security taxes are 6.2% of income, up to a maximum earnings ceiling. The limit increased to $168,600 in 2023. This translates to a dollar amount of $8,400.

The Bottom Line: Tax-Savings Strategies

Use these inflation-related changes to your advantage. Maximize tax-advantaged savings and plan your taxes proactively to keep your financial planning on track.


About The Author

Alchemist Wealth is led by the expertise of Andrew J. Tudor, CFP®, RICP®, CAP® and Fred Tudor III, AFC®, MBA. Alchemist Wealth serves clients as a fiduciary specializing in providing fee-only financial planning, investment management, and retirement planning services. With over 2 decades of combined experience in financial services, Fred and Andrew bring a wealth of knowledge and personalized solutions to meet your financial goals.

The information contained herein is intended to be used for educational purposes only and is not exhaustive. Diversification and/or any strategy that may be discussed does not guarantee against investment losses but are intended to help manage risk and return. If applicable, historical discussions and/or opinions are not predictive of future events. The content is presented in good faith and has been drawn from sources believed to be reliable. The content is not intended to be legal, tax or financial advice. Please consult a legal, tax or financial professional for information specific to your individual situation.

This content not reviewed by FINRA

Alchemist Wealth, LLC is registered as an Investment Adviser with the State of Ohio and only provides advisory services in states where registered or otherwise exempt from registration. All information provided herein is for educational and informational purposes only and should not be viewed as investment advice. Any links to third party information or data are believed to contain accurate information at the time of publishing.

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