Taxes – who loves them? Well, they do fund our infrastructure, national security, and public services that keep our country running. We all benefit from what we pay into the system. However, there’s a big difference between paying your fair share and leaving money on the table because you don’t know the rules of the game.
Now, most of you got into firefighting to serve your communities, not to become tax experts. But just like you train to handle different types of fires, you should understand the basic tax tools at your disposal. It’s not about gaming the system—it’s about using the tax code as it’s intended.
Some of these strategies might be too late to implement for 2024, and if that’s the case, you can consider this your pre-plan for 2025. The more you understand now, the better positioned you’ll be when the next tax season rolls around. If not, though, and you’d like assistance with figuring out your end-of-year finances, don’t hesitate to reach out. So, let’s get down to it.
Year-End Tax Checklist
Job-Related Expenses
Unreimbursed job expenses refer to work-related costs that your employer doesn’t pay back, and they might include items or services essential for you to perform your job as a firefighter effectively. Back in 2017, the Tax Cuts and Jobs Act law wiped out federal deductions for such expenses. Fortunately, some states still recognize these costs – though with strict limits. Example: California lets you deduct expenses that exceed 2% of your adjusted gross income. If you’re tracking:
Save those receipts, but be realistic. You’ll need significant expenses to clear your state’s threshold, and they need to be legitimate. Also, be sure to check your state’s specific rules – they change often, and the requirements may unexpectedly get tighter.
Pro tip: Create a digital folder now for 2025. Snap photos of receipts immediately – they fade fast, and you’ll thank yourself come tax time.
Station Meals and Per Diems
If your department requires mandatory meal contributions, document these costs. While most meal expenses aren’t deductible, mandatory firehouse meal programs just might qualify for state-level deductions.¹ If you do end up being able to deduct those, you could see a sizable reduction in your taxable income for the year.
- Required meal fund contributions
- Documentation showing the mandatory nature of the program
- Actual payment records
Volunteer Firefighter Credits
Different states handle these benefits in their own way. In New York², volunteer firefighters can claim a straightforward $200 credit ($400 if married and filing jointly).
In Pennsylvania³, local governments can offer volunteer firefighters both real estate and earned income tax credits. If your municipality participates, you could get up to 100% of your residential property tax back as a credit. Yes, you read that right—the full amount. You’ll need to pay the tax bill first, then apply for the rebate, but that’s significant savings coming back to you.
In 2024, Maryland volunteer firefighters can claim a $7,000 subtraction on their state tax return if they have at least three years of service under their belt.⁴ That’s enough to put a real amount of money back in your pocket.
Keep in mind that getting these credits isn’t automatic—you’ll need to submit an application through your chief or supervisor, who can verify your active status. Plus, these programs change frequently, and benefits vary significantly by location. Be sure to check your state’s current regulations and consult with a tax professional. Yes, it takes time and can be a pain, but a few minutes can put a lot of money back in your pocket, especially if you’re a volunteer firefighter.
IRA Contributions:
Looking to cut your tax bill? Your IRA might be able to help if you have one. In 2024, you can put up to $7,000 into your IRA ($8,000 if you’re 50+) and potentially deduct it from your taxes. But here’s what you need to know about deductions as a firefighter:
- If you have a pension or 457(b):
- Single: Full deduction available up to $77,000 income
- Married filing jointly: Full deduction up to $123,000 combined income⁵
You’ve got until tax day to make these contributions, but starting your financial and tax planning early can help streamline the process and give you a clear picture of how much you should contribute—or whether it’s the right move for you at all.
Solo 401(k) Contributions
Many firefighters we work with run businesses between shifts—everything from landscaping companies to personal training to real estate ventures. These side hustles can provide valuable extra income, but they also come with potential retirement and tax benefits.
One of the most powerful tax tools available to self-employed firefighters is the Solo 401(k). If you’re running your own business as a solo earner (or with a spouse), you can contribute significantly more to a Solo 401(k) than an IRA. For 2024, you can put away up to $23,000 as an employee contribution, PLUS up to 25% of your business’s net earnings as an employer contribution, up to a combined total of $69,000. If you’re over 50, you can add another $7,500 in catch-up contributions.⁶
As a business owner, you may also be able to defer invoices to keep your taxable income lower for the year, which, in combination with Solo 401k and/or IRA contributions, can potentially save you quite on taxes. Also, be sure to keep track of all of your business expenses to help maximize your deductions.
Tax-Conscious Charitable Giving
Have you donated to charity this year? If you’re itemizing deductions instead of taking the standard deduction, those donations could lower your tax bill. But not every donation qualifies.
Here’s what makes it count:
- Give to IRS-qualified organizations (many established charities qualify)
- Keep those receipts and document everything
- Get confirmation from the charity for donations over $250
- Watch out: Giving directly to individuals or GoFundMe campaigns usually isn’t deductible, no matter how worthy the cause.
Donating could be a significant factor in your larger tax strategy, especially if you’re close to the threshold between standard and itemized deductions. Plan your giving strategically, and those donations might be able to do double duty – helping others while reducing your tax burden.
Looking to Cut Your Energy Bills and Taxes?
Planning home upgrades this year? Uncle Sam might help foot the bill. The Inflation Reduction Act cranked up the tax credits for energy improvements in 2024. You can get back 30% on solar panels and up to $3,200 for upgrading your home’s efficiency with new windows, doors, insulation, and heat pumps.⁷
Here’s what makes this worth your attention: these credits reset every year. No lifetime caps anymore. Break up your home improvements across tax years to maximize these credits.
Like your charitable donations, keep every receipt and paperwork. You’ll likely need them come tax time to claim these credits.
Potentially Smart move: Break up your home improvements across tax years to maximize these credits. You’re already protecting your community at work – might as well protect your wallet while making your home more efficient.
In Conclusion
Tax laws change constantly. What worked last year might not work this year or the next, so always consult a tax pro who knows firefighter-specific deductions. The cost of good advice could pay for itself in saved taxes and avoided headaches.
January 2025 Action Items
Just as gear needs regular maintenance, your financial strategy needs periodic reviews. Schedule a meeting below to discuss your retirement plan – including pension, deferred comp, and benefits. While we always recommend tax pros for detailed tax advice, we can help make sure your overall retirement strategy aligns with your goals.
SOURCES:
- https://www.irs.gov/government-entities/federal-state-local-governments/issues-for-firefighters
- https://www.tax.ny.gov/pit/credits/volunteerfirefighters.htm
- https://www.pa.gov/agencies/osfc/fire-departments/support/recruitment-retention/tax-incentive.html
- https://mgaleg.maryland.gov/2024RS/fnotes/bil_0006/hb0646.pdf
- https://www.irs.gov/retirement-plans/plan-participant-employee/2024-ira-contribution-and-deduction-limits-effect-of-modified-agi-on-deductible-contributions-if-you-are-covered-by-a-retirement-plan-at-work
- https://www.forbes.com/sites/davidrae/2024/12/04/2024-solo-401k-contribution-deadlines-and-dates-to-know
- https://www.irs.gov/credits-deductions/energy-efficient-home-improvement-credit
