Before I start on tax talk, I want to take a moment to offer my heartfelt condolences to those who’ve been devastated by the wildfires currently ravaging southern California. It’s truly unimaginable to have to quickly pack up all your belongings and flee your home as fires rapidly spread. Our thoughts and prayers go out to everyone experiencing heartbreaking loss during this time.
If you or someone you know has fallen victim to the wildfires, the IRS is offering some relief in the form of an extended tax deadline. You now have until October 15th to file and pay your taxes. This new deadline applies to your 2024 IRA and HSA contributions as well (among other things if you own a business… see the IRS page on this for more).
These wildfires are just one instance that reflects many we’ve experienced over the past year, showing how a single event can significantly derail your life (and your tax situation). As the tax pro in your corner, know that I’m here to help you in whatever way I can.
Because when your life gets derailed, you need personalized tax help. Next week I’ll dive deeper into this topic, but for now, the important point is this: Getting help from a tax professional you can trust really makes a difference. My Harris County clients can attest to this. They choose us because…
- We’re experts at what we do.
- We don’t let small oversights (that could cause huge penalties) slip through the cracks.
- We’ve got their back, should they end up in an audit.
- We understand tax complexities – like how to balance deduction claims the right way.
- We are looking out for ways to save YOU money, and not just during filing time (which is something I touched on in one of my recent notes. I’d be happy to continue the conversation with you – if saving money appeals to you).
And now that tax season is nearly afoot, it’s time to set up your filing appointment. For many reasons (like avoiding delays and maximizing your refund potential, to name a few), you need to schedule your appointment NOW.
I say NOW because I want you to have the least stressful tax season possible. So, take some time to carve a slot out in your schedule for us to visit: calendly.com/postalplustax
One of the things we’ll cover in this appointment is your adjusted gross income (AGI). Forgive me for letting my tax nerd show a little bit in this one, but understanding your AGI can really unlock some big tax savings for you this tax season (and future ones) in the form of credits and deductions.
Adjusted Gross Income: Keep It Lean, Houston Filers
“We first make our habits, and then our habits make us.” – John Dryden
Adjusted Gross Income (AGI): Your gross income, adjusted by payments like retirement contributions, student loan interest, health savings contributions, etc. (And, the IRS’s starting point for calculating how much you owe them every year).
I’m getting right to the point here, I realize. That’s because it’s a foundational part of filing your 2024 taxes. And, it’s my job to point all my Houston clients and friends toward allllll the tax-smart opportunities (aka – credits and deductions that could make your wallet a little bit fuller).
How do you calculate your adjusted gross income?
Start by adding up all your income sources: Wages (check your W-2s or 1099s), tips, interest, capital gains, business income, retirement income, self-employment income, and anything else you can think of (I’ll spare you the exhaustive list – the IRS has already made one).
Then, from that total income, subtract any above-the-line deductions (again, the IRS’s list, not mine):
- Alimony payments (aka, payments to an ex-spouse)
- Educator expenses up to 300 dollars (or 600 if your spouse shares your educating passion)
- Certain business expenses of reservists, performing artists, and fee-basis government officials
- Deductible Health Savings Account (HSA), IRA, and retirement contributions
- Moving expenses if you’re military
- Deductible self-employment taxes (50 percent of the self-employment tax you pay and health insurance premiums)
- Student loan interest
Now you have your adjusted gross income — be mindful of special requirements for many of these categories when claiming the amounts. And remember: The smaller your AGI, the bigger the credits and deductions you’re eligible to claim on your return.
Stake your claims
With your calculated AGI in hand, you’ve got two options: Subtract either the standard deduction or itemized (“below-the-line”) deductions to determine your taxable income.
Charitable contributions are one of the big below-the-liners to consider. Though most people claim the standard deduction, if you itemize, charitable deductions are generally limited to 60 percent of your AGI.
Medical expenses apply here too, as long as they exceed 7.5 percent of your AGI.
You can also deduct up to 2.5k of student loan interest you’ve paid. It phases out at an AGI of 75–90k (single) or 150–180k (for married filing jointly).
Traditional IRA contributions may also be deductible if your AGI fits the bill: For 2025, the deduction phases out at 73–83k (single) or 116–136k (married filing jointly).
A low AGI could help you qualify for credits like…
The Child Tax Credit (worth up to 2k per child under 17). It begins phasing out at an AGI of 200k (single filers) or 400k (married filing jointly).
The Earned Income Tax Credit depends on your AGI, filing status, and the number of qualifying children.
Education credits like the American Opportunity Tax Credit (up to 2.5k per eligible student for tuition and related expenses). Phases out at an AGI of 80–90k (single) or 160–180k (married filing jointly). And if this credit brings your tax owed to zero, you can have up to 40 percent of the remaining amount refunded to you (up to 1k).
The Saver’s Credit – a little boost for contributing to your retirement plan . This one phases out at an AGI of 39.5k (single) or 79k (married filing jointly) in 2025.
The Premium Tax Credit helps cover health insurance premiums. Your eligibility depends on your income being 100–400 percent of the federal poverty level (calculated based on – you guessed it – AGI).
Slimming down
The key to maximizing benefits here is keeping your AGI as lean as possible year-round. You have to practice healthy tax habits (just like in life) – like making regular retirement and HSA contributions and harvesting your tax losses.
I’m aware that at the time I’m writing this, you don’t have a whole year to get last year’s AGI in tip-top shape. So how can you slim down your AGI before tax season? (Hint: It’s not with a January juice cleanse. Though, kudos if you’ve tackled that particular improve-your-health strategy.)
Making traditional IRA or HSA contributions can still lower your AGI for the 2024 tax year filing – they count as deductions for 2024 up until April 15th. So, now’s the time to make those contributions a priority.
I get it – all this may look like tax mumbo-jumbo to you. The good news is, that I’ll cover your adjusted gross income with you during your tax appointment. Which, if you haven’t yet scheduled, now’s the time. You’ll have lots more days and times to choose from now than if you wait until March.
calendly.com/postalplustax
To healthy tax habits,
Dominic Nguyen