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Reducing Taxable Income

bethbryer — Wed, 15 Jan 2025 18:27:58 GMT

We contribute the 15% to our 401K, deduct donations and mortgage interest, but what are some other ways we can reduce our taxable income? What are some other deductions we may consider? I have a 21 year old college age daughter who still lives at home but works and an 18 year old son who graduated in 2024, works full-time and is not yet in trade school (TBD for 2025). I am looking at ways to not owe at tax time without having to increase the amount of taxes taken out of our paychecks. If our check are reduced, I'd rather it be as a result of an increased 401K contribution. What stipulates "being behind" in retirement savings that may allow us to increase our 15% 401K contribution? We have good health insurance - low premiums and deductibles so we are only eligible for FSA, not HSA. Can parents claim college tuition or must the child/student claim that deduction?

Re: Reducing Taxable Income

MayaD — Wed, 15 Jan 2025 18:40:57 GMT

You can claim the tuition credit If you are claiming your kids as dependents on your return. The credit can reduce the amount of tax owed on your tax return. If the credit reduces your tax to less than zero, you may get a refund.

There are two education credits available: the American opportunity tax credit (AOTC) and the lifetime learning credit (LLC).

For more information and to check if you qualify for the credit, please visit the IRS website Education Credits.

Re: Reducing Taxable Income

bethbryer — Fri, 17 Jan 2025 18:31:34 GMT

What are some other ways we can reduce our taxable income and increase deductions? What is the criteria for exceeding 15% 401K contributions?

Re: Reducing Taxable Income

RobertB4444 — Fri, 17 Jan 2025 19:27:09 GMT

Here are some suggestions to lower your tax bill.

Increasing your 401K contributions involves being over 50. Here are some details for that.

You can also get a backdoor Roth set up even if you have a 401K. Your broker can walk you through it and there's some more information here. It won't reduce your tax bill but will increase your retirement savings.

@bethbryer