GRAND RAPIDS, Mich. — Tax season is approaching, and whether you are filing for the first time or a seasoned pro, there are ways to make the process easier and maybe even save some money.
In an exclusive interview, Matt Eilers, Founder and CEO of Medalist Wealth Management in Grand Rapids, shared essential tips for taxpayers as they prepare for the 2024 tax season.
One significant change this year affects those who earn money through platforms like PayPal, Venmo, or eBay. The threshold for receiving 1099 forms has decreased from $20,000 to $5,000.
Eilers explained, “If you received at least five thousand dollars in transactions, expect 1099s to be coming in the mail if they haven’t already.”
He noted that this threshold will drop even further to $2,500 in 2025.
Additionally, Eilers reviewed updates to standard deductions and tax brackets. The standard deduction for a family in 2024 is set at $14,600, increasing to $15,000, in 2025.
Tax brackets will also increase slightly due to a nearly five percent cost-of-living adjustment, although tax rates will stay the same.
“If you're in the 22% bracket, it's still 22%; it's just the amounts that are in that bracket might have moved,” explained Eilers.
Eilers also highlighted opportunities for families to leverage available credits, such as the earned income tax credit, and confirmed that the child tax credit remains at $2,000 per child.
When considering ways to optimize tax savings now and in the future, Eilers encouraged taxpayers to utilize retirement savings accounts. He emphasized that contributions to IRAs, 401(k)s, 403(b)s, and Roth accounts, can significantly impact tax liability.
“Some of them are going to provide the tax advantage today, to where we can deduct from our tax return and our taxable income,” stated Eilers.
Eilers outlined three primary tax “buckets” to consider for financial strategizing: The tax-deferred bucket, the taxable bucket, and the tax-free bucket.
“We have to help you sort out where is all of your money in relation to these buckets and what’s the level of tax diversification," emphasized Eilers.
This tax season is also an opportunity for taxpayers to assess their overall financial health. Eilers recommended consulting with professionals such as estate planning attorneys or certified public accountants. He emphasized, “Avoid debt. If you have debt, pay it off. There are a lot of really good strategies out there.”
Once debt is paid, Eilers recommends saving 15% of income for retirement, which could be in a 401k, 403b, or an IRA.
"Save 15% and it's incredible what that can do over the course of time when you're leveraging compound interest, you're leveraging employer matches in most situations, and you're leveraging what the growth in those accounts could experience that you can't touch until fifty-nine and a half anyway, and that's how you can really plan for the future," said Eilers.
Eilers also highlighted the importance of building an emergency savings account, including liquid assets and enough funds to cover three to six months of living expenses.
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