How to take advantage of the tax brackets?
- Jan 20, 2024
- 2 min read
Updated: Jan 7
Deductions and credits.
Keep your hard-earned money in your bucket!
Deductions and credits are the keys to reducing the amount of taxes you may owe Uncle Sam.
I cannot stress enough the importance of understanding the best circumstances to fully take advantage of the tax code. This is where having a good tax advisor becomes a differentiator in wealth building.
There are multiple strategies besides the high-level concept of the standard or the itemized deductions and credits.
Goal - Having your income taxed at a low rate
Knowing your current tax bracket is a good starting point to determine which bracket to target to keep your hard-earned money. Individual deductions may vary depending on filing status, age, disability, dependent claim, and most of all your tax planning throughout the year.
You can find detail information on the 2024 tax brackets and federal income tax rates at the Tax Foundation https://taxfoundation.org/data/all/federal/2024-tax-brackets/.
2024 Federal Income Tax Brackets and Rates
Tax Rate | Single Filers | Married Filing Jointly | Head of Households |
10% | $0 - $11,600 | $0 - 23,200 | $0 - $16,550 |
12% | $11,600 - $47,150 | $23,200 - $94,300 | $16,550 - $63,100 |
22% | $47,150 - $100,525 | $94,300 - $201,050 | $63,100 - $100,500 |
24% | $100,525 - $191,950 | $201,050 - $383,900 | $100,500 - $191,950 |
32% | $191,950 - $243,725 | $383,900 - $487,450 | $191,950 - $243,700 |
35% | $243,725 - $609,350 | $487,450 - $731,200 | $243,700 - $609,350 |
37% | $609,350 - More | $731,200 - More | $609,350 - More |
Adjustment for the year 2024 may also be found at the IRS site https://www.irs.gov/newsroom/irs-provides-tax-inflation-adjustments-for-tax-year-2024.
For more information on the deductions for individuals, see the IRS fact sheets at https://www.irs.gov/newsroom/deductions-for-individuals-what-they-mean-and-the-difference-between-standard-and-itemized-deductions.
Credits and deductions for businesses
Work opportunity tax credit
Employee retention credit
Employer-provided childcare credit
Opportunity zones
Clean vehicle credits
Energy efficient commercial buildings deduction
Credit for builders or energy-efficient homes
Advanced energy project credit
Research credit
Deducting business expenses
Abusive tax shelters and transactions
Limitation on the deduction for business interest expense
Rehabilitation credit
You can get detail information on credits and deductions for businesses from the IRS article at https://www.irs.gov/credits-deductions/businesses.
Strategy - Income shifting
Establish a business with the proper structure.
Involve children and family or partners and divide ownership accordingly in consideration of the tax brackets.
Maintain control of the business through using trusts and other entities.
Ensure your books are in order so you can account for all your deductions and ensure your are aiming for a profitable business.
Document the transactions.
Facts and circumstances for every tax payer are unique. If you need a closer look for your case, click here to book a free discovery call to see if we are a good fit for helping you take advantage of the tax brackets.
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