Year-End Tax Tips

As the end of the year approaches, it’s a great time to take steps that can optimize your tax situation and help you prepare for the upcoming tax season. Here are some practical tips to consider:

1. Maximize Retirement Contributions

  • 401(k): Contribute as much as you can to your 401(k). For 2024, the contribution limit is $22,500 (or $30,000 if you're 50 or older).

  • IRA: If eligible, contribute to a traditional or Roth IRA. The contribution limit for 2024 is $6,500 (or $7,500 if you’re 50 or older).

2. Review Your Tax Withholdings

Check your withholdings to ensure you’ve paid enough taxes to avoid penalties. Use the IRS Withholding Estimator to see if adjustments are needed.

3. Harvest Tax Losses

If you have investments that have decreased in value, consider selling them to offset gains in other investments. This strategy, called tax-loss harvesting, can reduce your taxable income.

4. Charitable Contributions

  • Make donations to qualified charities before December 31 to claim deductions. Ensure you have proper documentation.

  • Consider donating appreciated assets like stocks instead of cash to maximize tax benefits.

5. Take Advantage of Tax Credits

Check if you’re eligible for credits like the Child Tax Credit, Earned Income Tax Credit, or education-related credits. These can significantly reduce your tax bill.

6. Plan for Education Expenses

  • If you’re saving for education, contribute to a 529 plan. Many states offer tax benefits for contributions.

  • Pay tuition before year-end to claim education tax credits like the American Opportunity Credit or Lifetime Learning Credit.

7. Defer Income and Accelerate Deductions

  • If possible, defer income into the next year and accelerate deductible expenses into the current year to lower your taxable income.

  • Pay deductible expenses like property taxes or medical bills before December 31.

8. Use Your Flexible Spending Account (FSA)

If you have an FSA, check the balance and spend remaining funds on eligible expenses to avoid forfeiting unused money.

9. Review Business Expenses (For Self-Employed and Small Business Owners)

  • Invest in equipment or supplies that you need for your business before year-end to claim deductions.

  • Review your bookkeeping and categorize all expenses correctly.

10. Consider a Year-End Gift

You can gift up to $17,000 per recipient ($34,000 for a couple) in 2024 without triggering gift tax consequences. This can also help reduce your taxable estate.

11. Meet with a Tax Professional

By taking action before December 31, you can set yourself up for a smoother and more financially advantageous tax season. Have questions or need personalized advice? Contact us to schedule a consultation!