2024 Smart Tax Moves for Middle and Low-Income Earners: Year-End Planning Tips

As the year wraps up, it’s the perfect time to focus on strategies to help reduce your tax liability. With a few well-timed actions, middle- and low-income earners can make the most of tax-saving opportunities this year. Here are some tailored approaches to consider as you wrap up your financial plans.

Step 1: Choose Between the Standard Deduction or Itemizing

For 2024, the standard deduction amounts are $29,200 for joint filers, $14,600 for single filers, and $21,900 for heads of household. These amounts are often more favorable than itemizing for many taxpayers. However, if you have higher eligible deductions, itemizing may be worthwhile. Eligible deductions include:

• Medical expenses above 7.5% of your Adjusted Gross Income (AGI)

• State and local taxes up to $10,000

• Charitable donations

• Mortgage interest on certain loan amounts

Step 2: Maximize Deductions by Consolidating Expenses

If you are close to the threshold where itemizing may be beneficial, consider consolidating expenses in one tax year to exceed the standard deduction. For example, you might choose to make additional charitable contributions or pay medical bills this year rather than next to raise your deductible amount.

Step 3: Time Income and Deductions to Your Advantage

To optimize your tax situation, think about delaying income until 2025 or accelerating deductions into 2024 to lower your Adjusted Gross Income. A lower AGI could mean eligibility for additional benefits, such as:

• Deductible IRA contributions

• Child Tax Credit

• Education-related tax credits

• Student loan interest deductions

Alternatively, if you expect to be in a higher tax bracket next year, you might consider accelerating income into 2024.

Step 4: Contribute to Retirement Accounts

Maximizing contributions to retirement accounts like a 401(k) or IRA not only reduces taxable income for 2024 but also builds future financial security. Consider contributing as much as you can to lower your taxable income and set yourself up for retirement.

Step 5: Offset Gains with Losses

If you hold investments that have lost value, selling them by year-end can help offset gains from other investments and potentially reduce capital gains taxes. This strategy, known as tax-loss harvesting, can be a useful way to manage taxes if you have a mixed investment portfolio.

Additional Year-End Tax-Saving Tips

• Avoid Penalties on Required Minimum Distributions: If you’re 73 or older, remember to take any required minimum distributions (RMDs) from retirement accounts to avoid penalties.

• Use Flexible Spending Account (FSA) Funds: Many FSAs have a “use it or lose it” policy, so spend remaining funds on eligible expenses before December 31.

• Consider Deferring Bonuses: If your employer allows it, consider deferring any year-end bonus to 2025 to keep your 2024 taxable income lower.

• Qualified Charitable Distributions (QCDs): If you’re 70½ or older, think about making charitable donations directly from your IRA through a QCD, which can help reduce your AGI if you don’t itemize deductions.

• Gift Tax Exclusion: The 2024 exclusion allows tax-free gifts of up to $18,000 per recipient, a tax planning strategy that may benefit your family.

Get a Personalized Tax Plan

These strategies can significantly reduce the tax burden for middle- and low-income earners. Consider working with JCox to create a plan tailored to your needs and maximize year-end tax savings.

Taking action now can translate to substantial savings when tax season arrives.

Important Tax Considerations and Documentation for Content Creators

In today’s digital landscape, content creators—whether they’re YouTubers, influencers, bloggers, or podcasters—are growing businesses that must manage their taxes just like any other. While creating engaging content is the focus of most creators, understanding tax obligations is essential for long-term financial success. Below, we’ll explore important tax considerations for content creators and the Internal Revenue Code (IRC) sections that apply to them.

1. Understanding Self-Employment Taxes

Content creators are typically considered self-employed under the IRS. As such, you are responsible for paying both the employer and employee portions of Social Security and Medicare taxes, known as self-employment tax. This includes:

• IRC Section 1401: This section imposes self-employment taxes, requiring creators to pay 15.3% on net earnings (12.4% for Social Security and 2.9% for Medicare).

  • You can calculate this using Schedule SE (Form 1040) and deduct half of the self-employment tax on your return.

2. Income Reporting

All income earned through platforms like YouTube, Patreon, brand deals, sponsorships, and affiliate marketing must be reported as taxable income, even if it’s not in the form of cash (e.g., free products or services). Common forms used are:

• IRC Section 61: All income, from whatever source derived, is included in gross income, unless specifically excluded by law.

  • You’ll report this on Schedule C (Form 1040) as business income or use 1099-NEC forms received from clients.

3. Business Deductions

As a content creator, you may deduct ordinary and necessary business expenses to lower your taxable income. This includes expenses like equipment, software, marketing, and office space. Important deductions include:

• IRC Section 162: Allows deductions for ordinary and necessary expenses incurred in carrying on a trade or business.

• IRC Section 179: Allows the deduction of certain business property, like camera equipment and computers, in the year they’re purchased rather than depreciating them over time.

Common deductions for content creators include:

• Cameras, microphones, lighting, and other equipment

• Editing software subscriptions

• Home office expenses (if you have a dedicated space)

• Internet and phone bills (for business use)

• Travel and meal expenses related to business activities

4. Tracking Income and Expenses

Proper documentation is key to avoiding issues with the IRS. Content creators should maintain detailed records of all income and expenses. Here's what to keep track of:

• Receipts for all business-related purchases

• Contracts and agreements with sponsors or brands

• Bank statements and invoices

• Form 1099-NEC (for independent contractors)

• Form W-9 (for clients to report payments made to you)

Using accounting software to track these in real-time will make tax filing easier. If your income exceeds certain thresholds, you may need to issue 1099 forms to any independent contractors you hire.

5. Home Office Deduction

If you work from home, you might be eligible for the home office deduction, allowing you to deduct a portion of your rent, mortgage, utilities, and other household expenses. This deduction is subject to:

• IRC Section 280A(c): Allows deductions for a home office if it is used exclusively and regularly for business purposes.

Keep in mind that even the use of a specific room or portion of your home that you use exclusively for content creation can qualify you for this deduction.

6. Quarterly Estimated Taxes

Because content creators are self-employed, there’s no automatic withholding of federal or state taxes from their income. Therefore, it’s important to make quarterly estimated tax payments to avoid penalties.

• IRC Section 6654: Provides that individuals must pay quarterly estimated taxes if they expect to owe at least $1,000 in taxes when their return is filed.

To avoid penalties, you should pay at least 90% of the current year's tax liability or 100% of the prior year’s tax liability (110% for higher earners) throughout the year.

7. Handling Gifts and Sponsorships

Creators often receive free products or services from brands, which are considered taxable income. This falls under the following regulations:

• IRC Section 61(a): States that income includes the fair market value of property or services received, meaning you must report the value of gifted items as income.

  • Keep records of these gifts and their value to include on your tax return.

8. Sales Tax Considerations

If you're selling merchandise, digital products, or services directly to your audience, you may be responsible for collecting and remitting sales taxes, depending on your state’s laws. Be sure to research the specific sales tax rules that apply to your location.

9. International Income

If you earn income from audiences or sponsors abroad, international tax laws may come into play. The U.S. taxes its citizens on worldwide income, and the following provisions may be relevant:

• IRC Section 901: Provides a foreign tax credit to offset taxes paid to foreign countries.

  • This may help avoid double taxation on income earned overseas.

10. Hiring Help and Payroll Taxes

Once your content creation business grows, you may want to hire a team. In that case, you’ll need to consider payroll taxes for employees or 1099 reporting for independent contractors.

• IRC Section 3401: Defines wages for the purpose of income tax withholding on employees.

  • If you hire employees, you’ll need to withhold Social Security, Medicare, and income taxes, and file quarterly and annual payroll reports.

Navigating Tax Breaks After Natural Disasters: Essential Information

Dealing with Natural Disasters: Tax Relief and Casualty Loss Deductions

Florida recently faced catastrophic damage from Hurricane Milton, coming on the heels of Hurricane Helene, which affected millions across the southeastern U.S. These back-to-back storms are among several natural disasters this year, adding to a string of hurricanes, tornadoes, wildfires, and more. For those impacted, there are potential avenues for financial relief, including tax deductions for casualty losses and certain federal assistance measures.

What is a Casualty Loss Deduction? A casualty loss occurs when property is damaged, destroyed, or lost due to a sudden and unexpected event like hurricanes, floods, earthquakes, or fires. Progressive deterioration or wear and tear don’t qualify for these deductions. For instance, drought-related damage typically doesn't meet the criteria.

The eligibility for deducting a casualty loss differs based on whether the loss involves personal or business property. Generally, personal property such as homes, vehicles, and personal items are only deductible if the loss occurs in a disaster area declared by the President, making it eligible for federal assistance. However, for business or income-producing properties, like rental units, the loss may be deductible regardless of whether it happens in a federally declared disaster zone.

Casualty losses are usually deducted in the year they occur. However, if the loss results from a federally declared disaster, there’s an option to claim the loss for the previous year, potentially speeding up the refund process by amending the prior year’s tax return.

Accounting for Reimbursements If you receive insurance or other reimbursement for the loss, the deductible amount must be reduced by that compensation. If the compensation you receive exceeds your property's adjusted cost basis, it could result in a taxable capital gain, unless you qualify to defer reporting that gain.

Postponing the gain reporting is possible if you reinvest the compensation into property of similar value or function within a specific timeframe. This could involve restoring the damaged property, purchasing similar assets, or even buying an 80% controlling interest in a company that owns comparable property.

Alternatively, you can offset gains by casualty losses from areas not declared as disaster zones, but this is only applicable for personal-use property.

How Casualty Loss is Calculated For personal and partially damaged business property, the loss is the lesser of either the adjusted basis (the original cost plus improvements, minus depreciation) or the reduction in the fair market value (FMV) due to the casualty. For completely destroyed business property, the loss is the adjusted basis minus any salvage value and reimbursements.

If multiple items are damaged in one event, each loss must be calculated individually and then totaled to determine the overall casualty loss. For personal-use real estate, such as a home, the loss calculation applies to the entire property, including improvements like landscaping.

Limits on Deductions There are additional limits on deductions for personal property losses. For each casualty event, you must reduce the loss by $100 after subtracting salvage value and reimbursements. If multiple events occur, each must be reported separately. In addition, total personal property losses must be reduced by 10% of your adjusted gross income (AGI), after the $100 rule is applied, making small personal losses less likely to result in significant tax relief.

Keeping Thorough Documentation To claim a casualty loss deduction, you must have detailed records showing:

• Ownership of the damaged property (or contractual liability for leased property),

• The cause and date of the casualty,

• That the loss was directly due to the event,

• The adjusted basis of the property and any reimbursement details.

For personal property, you’ll also need to document the FMV before and after the casualty event.

Qualifying for IRS Relief This year, the IRS has extended tax relief to victims of several natural disasters, including those impacted by Hurricane Helene across states like Alabama, Georgia, North Carolina, and others. Relief often includes deadline extensions for filing and other tax obligations. It’s possible more relief will be offered to those affected by Hurricane Milton.

Even if you don’t reside in a federally declared disaster zone, you may qualify for relief if the records you need for filing are located in a covered area. For instance, if your accountant lives in a disaster zone and can’t file on your behalf, you could qualify for a deadline extension.

Natural disasters can bring unexpected and significant financial challenges, but knowing how tax deductions and relief programs work can ease some of the burdens for individuals and businesses.

Summary of Key Tax Proposals in Biden's 2025 Plan

Business Tax Revisions The budget plan suggests several updates that may impact businesses’ tax liabilities, many of which President Biden has previously supported. Key changes include:

• Corporate tax rates: The proposal suggests raising the corporate tax rate for C corporations from the current 21% to 28%, still lower than the 35% rate that existed prior to the 2017 Tax Cuts and Jobs Act (TCJA). The global intangible low-taxed income (GILTI) rate would increase to 14%, with other proposed adjustments pushing it to 21%. Additionally, the corporate alternative minimum tax would rise from 15% to 21%.

• Executive pay limitations: Biden also aims to expand the current cap on deducting executive compensation over $1 million in publicly traded C corporations to also include privately held ones. An aggregation rule would apply, treating members of a controlled group as one employer for determining affected executives.

• Excess business loss (EBL) limits: Currently, noncorporate taxpayers can only use business losses to offset business-related income or gains, with an inflation-adjusted cap (set at $305,000 for individuals or $610,000 for joint filers in 2024). The new proposal would make this limit permanent and treat prior-year EBLs carried forward as current-year losses, rather than as net operating loss deductions.

• Stock buyback tax: The Inflation Reduction Act (IRA) introduced a 1% excise tax on the value of stock buybacks. The new proposal would increase this tax to 4%, while also extending it to acquisitions of foreign corporations by certain affiliates.

• Like-kind exchanges: Property owners can defer taxes on gains from exchanging real property for like-kind assets. Under the new proposal, the deferral would be limited to $500,000 annually for individuals and $1 million for joint filers. Any gains exceeding these amounts would be recognized in the year of the exchange. Other types of assets would no longer qualify for this deferral.

Individual Tax Revisions Biden remains committed to his promise of not raising taxes for individuals earning less than $400,000 annually, while he proposes changes for higher earners. Key proposals include:

• Tax rates: The top marginal tax rate for individuals making over $400,000 ($450,000 for joint filers) would return to 39.6%, the rate in effect before the TCJA.

• Net investment income tax (NIIT): The NIIT would be applied to all pass-through business income for those earning more than $400,000, as well as income not covered by self-employment tax. In addition, the rate for the NIIT and the additional Medicare tax on earnings above $400,000 would increase to 5%.

• Capital gains taxes: Taxpayers with over $1 million in taxable income would see their capital gains taxed as regular income, rather than at the current maximum of 20%. Additionally, unrealized capital gains at death would be subject to taxation, with a $5 million exemption ($10 million for couples).

• Child Tax Credit (CTC): The budget proposes to increase the CTC to $3,600 per child under six and $3,000 for other qualifying children, and extend the credit’s eligibility age to 17 through 2025. There would also be a provision for monthly advance payments and a concept of “presumptive eligibility.” The credit would be permanently refundable.

• Premium tax credits (PTCs): The IRA’s enhanced health insurance subsidies for households earning more than 400% of the federal poverty line would become permanent, along with the reduction in required household income contribution for PTC eligibility.

• Gift and estate taxes: Several loopholes related to gift and estate taxes would be closed. Notably, certain transfers would be subject to a new annual exclusion threshold, with taxable transfers starting at $50,000 per year, regardless of whether gifts to individual recipients are below the annual gift exclusion (which will be $18,000 per recipient in 2024).

Source: The President’s Budget for Fiscal Year 2025

2024 Tax Proposals: A Closer Look at Trump and Harris’s Plans

Both Trump and Harris have proposed several ideas on taxes, some of which are still evolving. Here's an overview of their most significant tax proposals:

Tax Cuts and Jobs Act (TCJA) Provisions
The TCJA, which introduced lower tax rates and a larger standard deduction, will see many of its provisions expire in 2025. Trump aims to extend these cuts and potentially lower taxes further, though he hasn't provided specific details yet. Harris, who voted against the TCJA, has promised not to raise taxes for those earning less than $400,000 a year. However, to keep that promise, some TCJA tax cuts might have to stay in place. She supports raising the tax rate for high earners back to 39.6%, similar to pre-TCJA levels, and has suggested higher taxes on investment income and Medicare for those earning over $400,000.

Corporate Taxation
Trump plans to reduce the corporate tax rate to 20% and eliminate the corporate alternative minimum tax (CAMT), introduced in the Inflation Reduction Act. Harris, meanwhile, proposes increasing the corporate tax rate to 28%, and she would raise the CAMT to 21%. She also wants to increase the tax on stock buybacks and prevent large companies from writing off compensation over $1 million for top employees. Additionally, her proposal includes increasing the tax deduction for small business startup expenses from $5,000 to $50,000.

Individual Income Tax Changes
Trump suggests exempting restaurant and hospitality workers’ tips from income and payroll taxes, and he also wants to make overtime pay tax-free. However, experts warn these changes could be exploited by businesses. Harris supports exempting tips from income taxes as well but proposes safeguards to prevent employers from cutting wages in response. She also has measures to stop high earners from reclassifying their bonuses to avoid taxes. Trump has expressed interest in removing taxes on Social Security benefits as well.

Child Tax Credit
Trump's running mate, J.D. Vance, has proposed a $5,000-per-child tax credit, but Trump hasn’t officially backed it. Harris advocates for increasing the child tax credit to $3,600 for children under age six and to $3,000 for older children. She also supports expanding the Earned Income Tax Credit and healthcare subsidies for low-income families.

Capital Gains Taxation
Harris plans to tax unrealized capital gains for individuals with a net worth over $100 million, meaning they'd be taxed on the appreciation of assets they haven’t sold yet. She also wants to increase the capital gains tax for high-income earners and tax these gains at ordinary income tax rates. For those inheriting large estates, she proposes taxing unrealized gains at death, with exemptions in place for smaller estates.

The Current Housing Proposals
Trump has hinted at offering tax incentives for first-time homebuyers but hasn't given any specific details yet. In contrast, Harris has a more detailed plan, which includes down-payment assistance for families who have rented responsibly and tax incentives for builders creating affordable homes for first-time buyers.

Tariff Policies
Trump has been vocal about raising tariffs, including a standard 10% on imports, with much higher rates for products from countries like China. He has even floated the idea of replacing income taxes with tariffs, though critics argue this would increase costs for lower-income Americans.

Overall Impact
While Trump’s tax plans are estimated to add $5.8 trillion to the federal deficit over the next decade, Harris’s proposals are projected to increase it by $1.2 trillion. However, the actual impact will depend on how Congress shapes and approves these policies. Refer to the tax overview for business tax provisions and individual tax provisions outlined in more detail from sources summarized here.

Sources:

Tax Cuts and Jobs Act

Budget of the U.S. Government Fiscal Year 2025