2024 Year-End Tax Tips

Here are some things to consider as tax year 2024 reaches a conclusion.

1. Defer income to next year

Consider opportunities to defer income to 2025, particularly if you think your tax costs may be lower next year. For example, you may be able to delay the collection of business debts, rents, or payments for services rendered. Or, if you had a really good year on the job and earned a year-end bonus, ask for it to be paid in January.

2. Accelerate deductions

You might also look for opportunities to accelerate deductions into the current tax year. If you itemize deductions, and it’s been a busy year for doctor visits, buy any additional doctor recommended medication and/or supplies before the end of the year.

3. Make deductible charitable contributions

Most taxpayers don’t itemize deductions because the standard deduction amounts are much higher than they used to be and there’s a $10K limit on the amount of taxes paid that can be used for itemized deductions. One of the best ways to generate itemized deductions that exceed a standard deduction is to make charitable contributions. Big ones. If that year end bonus has to be paid in December and you’re feeling charitable, consider donating it. Or, if you don’t want to give away your bonus but you’ve had a really big year with investments, consider donating shares of appreciated stock/mutual funds/ETF’s. That’s a potential Win-Win-Win: You avoid the tax cost of capital gain income, you get a higher deduction(itemized over standard) and you get the reward of doing something good.

4. Bump up withholding to cover a tax shortfall

If you think(or know) you have a large tax bill coming, consider increasing your withholding for the rest of the year. Time may be limited for employees to request a Form W-4 change and for their employers to implement it before the final pay of the year but if it works, this strategy can be used to make up for not making quarterly estimated tax payments.

5. Save more for retirement

Traditional 401k/403b/457 contributions is the largest and most convenient deduction available to most taxpayers and a surefire way to reduce taxable income. If you haven't already contributed up to the maximum amount allowed, consider doing so or at least increasing your contributions(save the bonus). For 2024, you can contribute up to $23,000 to employer sponsored retirement plans plus $7,500 if you're age 50 or older). If you’re not an employee with a 401k but you’re a business owner or self employed, you can start your own 401k and have the same opportunity for tax deferred saving.

6. Don’t Forget to Take RMD’s

If you are age 73 or older, you generally must begin taking required minimum distributions from traditional IRA’s and/or employer sponsored retirement plans by the end of the year. The penalty for failing to do so is substantial: 25% of any amount that you failed to distribute as required.

7. Accept investment losses

If you had a bad year with investments, don’t be afraid to sell and start over. If you have a mix of gains and losses, selling the losers can be even more valuable. For example, if you have capital gain income on the way from selling investments at a profit, you might be able to offset some or all of those gains by selling losing investments. Any losses over and above the amount of your gains can be used to deduct up to $3,000 in one tax year with any remaining losses carried forward to future years.

To learn more, contact MNM Vested, LLC.