2024 Year-End Tax Planning Tips
As 2024 draws to a close, it's time to review your tax strategy to save money and make the most of tax benefits before the new year. Thomas Cooper CPA PLLC is here to guide you through smart year-end tax planning moves to reduce your tax liability and improve your financial position for 2025. Here are our top year-end tax tips:
1. Maximize Retirement Contributions
401(k) Contributions: Max out your 401(k) contributions to reduce taxable income. In 2024, you can contribute up to $23,000 (or $30,500 if you’re over 50). IRA and Roth IRA contributions are also an effective way to save for retirement while cutting taxes.
Roth Conversions: Consider a Roth IRA conversion if you’re in a lower tax bracket. You’ll pay taxes now but enjoy tax-free withdrawals in retirement.
2. Tax Loss Harvesting for Investment Gains
Offset Gains with Losses: Sell underperforming investments to offset capital gains, reducing your taxable income. Up to $3,000 in net losses can be used to offset ordinary income, saving you money.
Avoid Wash Sales: Be cautious of the IRS wash-sale rule, which disallows tax losses if you repurchase the same or substantially identical investment within 30 days.
3. Charitable Contributions for Tax Deductions
Donate to Charities: If you itemize deductions, make charitable donations by December 31 to benefit from a 2024 tax deduction. Options include cash donations or donating securities for a tax advantage.
Consider Donor-Advised Funds: A donor-advised fund allows you to make a tax-deductible contribution now and select charities later, maximizing your deduction flexibility.
4. Annual Tax-Free Gifts
Utilize the Gift Tax Exclusion: You can gift up to $18,000 per individual without incurring a taxable gift. This tax-free gift can reduce your estate size, benefiting both you and your loved ones.
529 Education Savings Plans: Contribute to a 529 plan for a potential tax-free gift depending on the amount.
5. Tax Planning for Small Businesses
Qualified Business Income Deduction (QBI): Small business owners may qualify for a 20% deduction on Qualified Business Income. Ensure you’re eligible and set up to maximize this benefit.
Adjust Income and Expenses: Depending on your tax bracket, consider deferring income to 2025 or accelerating deductions for expenses in 2024 to minimize taxes.
6. Health Savings Account (HSA) Contributions
Max Out HSA Limits: If you have a high-deductible health plan, fully fund your HSA to reduce taxable income. For 2024, contribution limits are $4,150 for individuals and $8,300 for families, with a $1,000 catch-up for those 55 and older.
7. Review Withholdings and Estimated Taxes
Avoid Penalties: Check your 2024 withholdings to avoid underpayment penalties. Make a fourth-quarter estimated payment if you’re self-employed or if your withholdings are insufficient.
8. Education Tax Credits
Claim Education Credits: Use the American Opportunity Credit and Lifetime Learning Credit if you or a dependent are eligible for tuition-related credits.
529 Plan Tracking: Track 529 plan distributions and expenses to ensure tax-free treatment on qualified expenses.
Start 2025 with a Strong Financial Foundation
Now is the time to take charge of your taxes and save. These 2024 year-end tax planning tips can help you reduce your tax liability and keep more of your hard-earned money. Contact us today to schedule a year-end tax planning consultation.
