Not Your Standard Tax Savings Strategy - Ep #83

Welcome to episode 83 of the One for the Money podcast. This episode airs in April, which means we are in the final days of tax season. I’ve never met anyone who likes paying more taxes than they have to, and in this episode, I’ll share how you can utilize the standard or itemized deductions so you don’t have to pay them. Hence the title of this episode, not your standard tax savings strategy.

In the tips, tricks, and strategies portion, I will share a tip regarding how paying it forward can save you on taxes.

In this episode...

• Standard vs. Itemized Deductions [2:15]
• Tax Planning Strategies for Deductions [7:04]
• Benefits of Donating Stock vs. Cash [9:17]
• Importance of Tax Planning in Financial Strategy [11:32]

MAIN

One of the best financial planning quotes I’ve read is this “In America, there are two tax systems; one for the informed and one for the uninformed. Both are legal.”

How true that is. But the challenge with being “informed” about taxes is that Taxes are incredibly complex. Just the federal tax code alone is over 6700 written pages, and the US treasury’s interpretations of the tax code, because it isn’t sufficiently clear, are tens of thousands of pages more. For these reasons and others, many individuals ignore the tax laws altogether and consequently pay more taxes than required. However, with a little bit of better tax planning, you can have a better life because you will pay less in taxes and have more money to spend on great experiences.

A particular area that many taxpayers don’t understand is the deductions everyone receives on their income. Deductions are the amount of your income that is not taxed at all. Taxpayers will take one of two forms of these deductions, which are known as either the standard deduction or itemized deduction. The standard deduction is a default amount of income that you would pay no taxes on. The itemized deductions are for those individuals who have certain key items (such as medical expenses, mortgage interest, gifts to charity, and state and local taxes) that would provide a higher amount of their income that is not subject to tax.

Just what are the amounts not subject to tax, well in 2025 the standard deduction for an individual is $15,000, and for a married couple it is just double that or $30,000. A reminder, what that means is on the first $15,000 of income an individual pays 0% in taxes. So if a person has $65,000 of income in 2025, they would only have to pay Federal taxes on $50,000 because the first $15,000 of their $65000 salary is not taxed.

I should note that the standard deduction wasn’t always this high, but back in 2019 when the Tax Cuts and Jobs Act was passed, it doubled the standard deduction from what it was previously. Before this doubling of the standard deduction, just over two-thirds of taxpayers took the standard deduction and just under one-third itemized deductions, but now with the increase of the standard deductions, over 90% of taxpayers claim the standard deduction with just around 9% taking itemized deductions. That’s a good thing for most tax payers as lower earners had more of their income not subject to tax.

Just what are these itemized deductions? Itemized deductions are when individuals have items on which they spent their income, that in total, were higher than the standard deduction. Itemized deductions are captured on Schedule A of the tax forms. There are primarily four items. The first is Medical expenses, the second is mortgage interest on your primary and secondary residence, the third is state and local taxes, and the fourth is charitable contributions.

For medical expenses, it is only for those that are above 7.5% of your AGI. So if your adjusted gross income was $100,000, you would include with your itemized deductions any medical expenses that were more than $7500 for that tax...