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The Ultimate Guide To Navigating Tax Filing Season

BECU Investment Services

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There are many ways you can prepare for federal income tax season. Here are some tips for navigating the tax filing process to help reduce Tax Day stress.

Tax Filing Process & Tips

  • Gather and organize your tax documents.
    Compile your tax documents and organize them. Print off important documents so they are all together (unless you are e-filing) fora more manageable filing year.
  • Determine your filing status.
    Your filing status is the rate at which income is taxed. There are five filing statuses: single, married filing separately, married filing jointly, head of household, and qualifying widow(er) with dependent child filing status.
  • Check if you qualify for tax exemptions, deductions, or credits.
    • Tax deductions – Tax deductions reduce your taxable income, potentially lowering the tax you owe. A few examples include medical expenses, property taxes and charitable contributions.
    • Tax exemption – Tax exemptions include income or transactions that are free from tax at the federal, state, or local level. These include some nonprofits, specific veterans (for example, disabled veterans), and income from some types of investments like municipal bonds or 401(k)s.
    • Tax credit – Tax credits directly reduce the amount of your tax bill. There are either refundable or nonrefundable credits. Examples include the earned income tax credit (refundable) and saver's credit (nonrefundable).
  • Consider filing electronically (e-file).
    The IRS has partnered with several companies to provide electronic filing to the public. Some of these options include TurboTax, H&R Block, and TaxSlayer.
  • Consult a financial advisor.
    A financial advisor can work with you to get the most benefit from your tax filing.

Tax Rates

Below are important 2023 tax rates for filing in 2024 (Taxes are due in April).

Married Filing Jointly

  • 37% for incomes over 732,200
  • 35% for incomes over $462,500 but not over $693,750
  • 32% for incomes over $364,200 but not over $462,500
  • 24% for incomes over $190,750 but not over $364,200
  • 22% for incomes over $89,450 but not over $190,750
  • 12% for incomes over $22,000 but not over $89,450
  • The lowest rate is 10% for incomes of $22,000 or less

Single Filers

  • 37% for incomes over $578,125
  • 35% for incomes over $231,250 but not over $578,125
  • 32% for incomes over $182,100 but not over $231,250
  • 24% for incomes over $95,375 but not over $182,100
  • 22% for incomes over $44,725 but not over $95,375
  • 12% for incomes over $11,600 but not over $44,725
  • The lowest rate is 10% with incomes of $11,000 or less

Alternative Minimum Tax Exemption

  • The Alternative Minimum Tax exemption, which impacts approximately 0.8% of the U.S. population, goes into effect if income is above the annual AMT exemption amount. This generally applies to taxpayers with high incomes, ensuring these taxpayers pay at least the minimum tax amount owed. Their tax is calculated under regular tax rules and AMT rules, and they pay the higher amount of the two. For the 2024 tax filing year, the AMT exemption amount is $81,300 and starts to phase out at $578,150 ($126,500 for married couples filing jointly whose phase out begins at $1,156,300).

Earned Income Tax Credit

  • The Earned Income Tax Credit amount is $7,430 for qualifying taxpayers in the 2024 tax filing year. To qualify, you must meet the basic rules:
    • Must be a U.S. citizen or resident alien for the entire year.
    • Have a valid Social Security number by the due date of your 2023 tax return.
    • Have an earned income through working under $63,398.
    • Have investment income below $11,000 in the 2023 tax year.
    • Will not file form 2555 for foreign earned income.
    • Qualify for the rules* of separation from your spouse and not filing a joint tax return.
  • There are also special qualifying rules for members of the military, clergy, and taxpayers and their relatives with disabilities.
  • The monthly limitation for the qualified transportation fringe benefit and qualified parking is $300.
  • The dollar limitation for employee salary reductions for contributions to health flexible spending arrangements is $3,050.
  • For cafeteria plans that permit the carryover of unused amounts, the maximum carryover amount is $610.
  • For participants with self-only coverage in a Medical Savings Account, the plan must have an annual deductible that is not less than $2,650 and not more than $3,950. The maximum out-of-pocket expense amount for self-only coverage is $5,300.
  • The foreign-earned income exclusion is $120,000.
  • The lifetime gift and estate tax exemption amount is now $12,920,000 (this amount may significantly decrease after Dec. 31, 2025, when the Tax Cuts and Jobs Act sunsets unless policymakers extend these provisions).
  • The annual gift exclusion is now $17,000.
  • The maximum credit allowed for adoptions is the qualified adoption expenses up to $15,950.
  • The Lifetime Learning credit applies to individuals who are enrolled in an eligible educational institution (colleges, universities, or technical schools offering education beyond high school) and taking eligible courses (those that improve or acquire job skills). They must also have a modified adjusted gross income (MAGI) between$80,000 and $90,000 for single filers and $160,000 and $180,000 for joint filers. You aren't permitted to claim the credit if your MAGI is $90,000 or higher ($180,000 if filing a joint return). The tax credit is worth up to 20% of the first $10,000 of qualified tuition and related expenses paid during the taxable year for a maximum credit of $2,000.

Personal Exemption & Itemized Deductions

Items that are unaltered by indexing due to the Tax Cuts and Jobs Act of 2017. This may change upon sunsetting of the Tax Cuts and Jobs Act at the end of 2025.

  • The personal exemption remains at “0” (line 5 of your 1040, which states that you want the most amount of tax taken out of your pay each pay period). If you put “1,” for example, less taxes are withheld from your paychecks, so you get more money now with a smaller refund.
  • There is no limitation on itemized deductions.

Protecting Yourself From Tax Identity Theft

Identity theft is a severe problem in today's world. To help mitigate the risk of identity theft, consider taking these steps:

  • Secure your devices.
    Always keep your devices on your person or in a secure location, and ensure your passwords are strong.
  • Keep your Social Security number private.
    Criminals steal your Social Security number to obtain credit or even a job in your name.
  • Regularly monitor your accounts.
    Monitoring your accounts on a regular basis can help you recognize if someone is using your identity to file a fake tax return to claim a fraudulent refund. They may also use this information to get a job or claim your child as a dependent on a phony return.
  • Beware of phishing.
    Phishing involves people sending emails or other messages posing as a family member, friend, or legitimate company to attempt to steal information. Never click on links or open emails from anyone you don't know.
  • Only go to a tax preparer you trust.
    Be sure only to get tax help from a legitimate tax preparer.
  • Regularly change your passwords.
    Changing your passwords often and ensuring you aren't repeating them for multiple accounts helps to prevent identity thieves from gaining access to your personal information.
  • Respond to IRS notices.
    The IRS may send letters 4883C or 6330C asking you to verify your identity. Call the toll-free number provided in the letter to help keep your identity secure. Until the IRS hears from you, they won't be able to process your tax return, issue refunds, or credit any overpayments to your account.
  • Consult a financial advisor.
    A financial advisor can help you take the necessary steps to keep your information out of the hands of identity thieves and provide guidance for a more manageable and efficient tax filing.

Talk to a Financial Advisor

Financial advisors at BECU Investment Services are here to help. Our team will take the time to get to know you, understand your goals and plan and implement a financial and retirement strategy that's appropriate for you. Set up a complimentary consultation or call 206-439-5720 today.

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Important Disclosures

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly.

Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.

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All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.


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