How can I minimize my taxes paid when starting a new job?

gregoryyyyy

I recently got a new, higher-paying job that I expect to have next year. (hired in August). I will most likely be in a new tax bracket this year and probably an even higher one next year. What are some of the things I can do to minimize my taxes paid overall? I am not concerned about taxes in a particular year; I would like to minimize my taxes over 2024 and 2025. I'm also a grad student. I own stocks and a Roth IRA. Income from both should be small. I do not own a home. my state has no income tax.

kiarab

Hello,

First of all, congratulations on the new job. I would recommend that you make sure that your W-4 which accounts for your taxes withheld is up to date. This will help ensure that you do not owe a ton of taxes when it is time to file your return.

If you are a single person making a lot of money, there is not a ton that you would qualify for to help reduce your tax liability. Most common ones involve children or being a lower-income household, like the Earned Income Credit or Child Tax Credit.

I'm going to list some things you can look that may help you reduce your tax liability:

1. Contributing to a traditional IRA. Roth IRAs do not get a deduction as they are not taxes when you take a distribution. Traditional IRAs are taxes when you take a distribution, so you are allowed a deduction when you contribute to one (Please note the amount of income you have will limit or prevent you from claiming this, so make sure your AGI levels are below the limit)
2. If you adopt a child, you may be able to claim a tax credit.
3. I know you do not have a home right now, but if/when you do, you can claim things like mortgage interest paid, you can get residential energy credit for things like getting solar power or energy efficient windows, etc.
4. You could get a clean vehicle (used or new). The requirements are a bit different for each one.
5. Itemize your deductions: You can deduct things like state taxes, sale tax, charitable donations, mortgage interest, out of pocket medical expenses, etc. The standard deduction for a single filer is 14,600 for 2024. So if your total itemized expenses are greater than that, it would benefit you to itemize.
6. Education Deduction: As a grad student, you may be able to deduct some of those expenses.

Here is the list of credits and deductions that an individual may qualify for: https://www.irs.gov/credits-and-deductions-for-individuals