Lowering your taxable income is a common concern for individuals and business owners. While the Tax Cuts and Jobs Act (TCJA) provided increased 澳洲幸运5官方开奖结果体彩网:standard deductions for many taxpayers, it also🐼 eliminated several other itemized deductions and personal exemptions. However, you can still use plenty of strategies to further reduce taxable income, which can result in substantial tax savings. Taxable income can be reduced further🌊 with a few strategic steps outlined below.

Save for Retirement

Maximizing retirement savings is one of the most straightforward ways to reduce your澳洲幸运5官方开奖结果体彩网: taxable income. Contributions to certain 澳洲幸运5官方开奖结果体彩网:retirement accounts are made with pretax dollars, lowering your taxable income for the year in which the contributions are made.

Employer-Sponsored Plans

If your employer offers a retirement plan like a 401(k) or 403(b), you can contribute up to $23,500 in 2025 ($23,000 in 2024). Individuals over 50 can take advantage of 澳洲幸运5官方开奖结果体彩网:catch-up contributions of an additional $7,500 in 2024 and 2025. For 2025, a higher catch-up contribution limit of $11,500 applies for employees aged 60, 61, 62, and 63 who participate in these plans. These contributions are made pretax, meaning they reduce your taxable income directly.

Individual Retirement Accounts (IRAs)

Contributing to a traditional 澳洲幸运5官方开🐭奖结果体彩网:individual retirement account (IRA) is another effective way to reduce taxable income. For 2024 and 2025, the contribution limit is $7,000, with a catch-up provision of an additional $1,000 for those 50 and older. Contributions to a traditional IRA are deducted from your taxable income for the year in which the contribution is made.

Traditional IRA contributions can be deducted from a person's tax return, reducing the taxes owed in the tax year of the contribution. However, unlike contributions to an employer-sponsored plan, IRA contributions are made with after-tax dollars, meaning the money has already had income taxes taken out.

Taxpayers (or their spouses) with 澳洲幸运5官方开奖结果体彩网:employer-sponsored retirement p𒊎lans may also be able to deduct some or all of their traditional IRA contributions from taxable income. The IRS has 澳洲幸运5官方开奖结果体彩网:detailed rules about whether—and how much—they can deduct depending on their income.

Previously, individuals over age 70½ were not allowed to contribute to a traditional IRA. However, as of 2020, this age limit has been eliminated, allowing anyone to contribute and benefit from 澳洲幸运5官方开奖结果体彩网:tax deductions, regardless of their age.

Consider Flexible Spending Plans

Many employers offer a Flexible spending account (FSA), which allows you to set aside pretax dollars for certain expenses, like 澳洲幸运5官方开奖结果体彩网:medical costs. Contributions to an FSA can reduce your taxable income, making them a great way to lower your tax bill while saving for healthcare expenses.

A portion of earnings is set aside in a separate account managed by an employer. An employee can contribute up to $3,300 in 2025 ($3,200 in 2024).

Under the use-or-lose-it rule, unused funds are forfeited at the end of the plan year. However, many employers allow you to 澳洲幸运5官方开奖结果体彩网:carry over a small amount of unused funds or offer a grace period to use the remaining balance.

Under the carryover option, an employee can carry over up to $660 of unused funds to the following plan year in 2025 ($640 in 2024). Under the grace period option, an employee has until 2.5 months after the end of the plan year to use the remaining money, but none can be carried over. Employers can offer either option, but not both, or none at all.

Health Savings Account (HSA)

澳洲幸运5官方开奖结果体彩网:Health savings accounts (HSA) function similarly to FSAs but are available to individuals with high-deductible health plans (HDHPs). Contributions to an HSA are made with pretax dollars, and funds can be used tax-free for qualified medical expenses.

• Eligibility: To qualify for an HSA, you must have a 澳洲幸运5官方开奖结果体彩网:high-deductible health plan. For 2025, this means a plan with a deductible of at least $1,650 ($1,600 in 2024) for self-only coverage, or $3,300 ($3,200 in 2024) for family coverage.
• Contribution Limits: The 2025 contribution limit is $4,300 for individuals ($4,150 in 2024) and $8,550 for families ($8,300 in 2024).
• Maximum Annual Out-of-Pocket Expenses: Under a high-deductible plan, 2025 annual out-of-pocket expenses, which include deductibles, and co-payments (not premiums), cannot exceed $8,300 ($8,050 in 2024) for self-only coverage and $16,600 ($16,100 in 2024) for family coverage. HSA contributions can be rolled over if unused in the year they were saved.
  

Take Business Deductions

Self-employed individuals and business owners can significantly reduce their taxable income by claiming business-related deductions. Some common options include:

Home Office Deduction

A home office deduction is calculated using either a simplified or regular method to reduce taxable income if a portion of a home is used as dedicated office space. The self-employed can also deduct a portion of their 澳洲幸运5官方开奖结果体彩网:self-employment tax and the cost of health insurance, among other expenses, to lower taxable income.

Business Expenses

As a business owner, you can deduct many necessary b🐠usiness expenses, such as:

• Office supplies
• Advertising costs
• Equipment and software
• Travel expenses

By making business-related purchases before the end of the tax year, you can 澳洲幸运5官方开奖结果体彩网:reduce your taxable income for t♏hat year.

Retirement Savings Plans

A variety of retirement savings plans exist for the 澳洲幸运5官方开奖结果体彩网:self-employed, including an individual 401(k) and a 澳洲幸运5官方开奖结果体彩网:simplified employ꧒ee pension (🐬SEP) IRA. Both options allow for higher annual contribution limits and allow for low༒ering ta🍃xable income through pre-tax contributions.

• 澳洲幸运5官方开奖结果体彩网:SIMPLE IRA: Allows contributions of up to $16,500 in 2025 ($16,000 in 2024), plus an additional $3,500 catch-up contribution for individuals 50 and older.
• 澳洲幸运5官方开奖结果体彩网:Solo 401(k): Allows contributions of up to $23,500 in 2025 ($23,000 in 2024), with additional catch-up contributions for those 50 and older.
  
• SEP IRAs: Allows contributions up to 25% of compensation, up to $70,000 in 2025 ($69,000 in 2024).

The SECURE Act

The SECURE Act has implications for small business owners. The Act encourages business owners to set up retirement plans for employees by providing tax incentives if they collaborate with other small businesses to offer 澳洲幸运5官方开奖结果体彩网:Multiple Employer Plans (MEPs).

The 澳洲幸运5官方开奖结果体彩网:SECURE Act also allows more part-timers to save through employer-sponsored retirement plans. To do so, workers will need to put in at least 500 hours a year for three consecutive years to be eligible.

The Bottom Line

Though tax reform eliminated many itemized deductions, plenty of ways exist to reduce your 澳洲幸运5官方开奖结果体彩网:taxable income and save on taxes. You ca🦩n significantly lower your tax burden by utilizing retirement accounts, health savings plans, and business deductions. Be sure to consult a tax professional to explore your options and en🎀sure you're making the most of available tax-saving opportunities.