A Thoughtful Approach to Tax Planning

Tax planning is a cornerstone of managing your finances. By understanding key strategies, you may be able to better position yourself for the year. Below are some areas to explore:

Understanding Tax Brackets
The U.S. uses a progressive tax system, meaning that tax rates increase as your income does. Familiarizing yourself with the current tax brackets can help in determining how much to withhold from your paycheck. Reviewing your tax situation annually may help you avoid unexpected expenses. Use this calculator to help estimate your federal marginal tax rate, average income tax rate, and tax bracket.

Contribute to Retirement Accounts
Retirement accounts can be helpful for tax savings. For instance:

• 401(k) Plans: Contributions are made pre-tax, reducing your taxable income for the year. For 2025, the contribution limit is $23,500.
• Traditional IRA: Depending on your income and participation in employer-sponsored plans, contributions may be tax-deductible. The 2025 limit is $7,000.
• Roth IRA: While contributions are made with after-tax dollars, qualified withdrawals during retirement are tax-free.

Utilize Your Health Savings Account (HSA)
If you are enrolled in a health plan, you may be eligible to contribute to an HSA. Contributions to these accounts are pre-tax, and qualified withdrawals for medical expenses are tax-free. This may be a way to save for both short-term and long-term healthcare needs. Read more about key tax benefits of an HSA here.

Explore Tax Credits
Tax credits can help reduce the amount of tax you owe. Some commonly used credits include:

• Child Tax Credit, available to parents or guardians of dependent children under 17.
• Education Tax Credits, such as the American Opportunity Tax Credit, for qualified education expenses.
• Energy-Efficient Home Improvement Credit for installing qualified energy-saving systems in your home.

These credits can vary in their eligibility requirements, so it’s important to understand the specific criteria and documentation needed.

Consider Charitable Contributions
Donating to qualified charities offers the chance to support nonprofit organizations and offers potential tax benefits. If you itemize deductions, you may be able to deduct cash contributions or even the fair market value of donated assets, like stocks or property. Learn more about charitable giving here.

Plan for Required Minimum Distributions (RMDs)
When you reach age 73, IRS rules require you to begin withdrawing a “required minimum distribution” (or RMD) from your IRA plan each year. Our team with offices in Marquette, MI, Lake Geneva, WI, Dubuque, IA, and Rockford, IL will help you avoid these penalties by working with you to create a strategy for these distributions that is compliant with the law. Get answers to commonly answered questions about RMDs here.

Implementing these tax planning strategies requires careful consideration of your individual financial situation. If you are unsure about which approaches may apply to your situation, please contact us at StackStoneWealth@ampf.com to learn more.