2024 tax tips to take advantage of before year-end that can help you save money at tax time. Learn how to accelerate deductions and defer income to lower your tax burden.
Whether you’re trying to save more for retirement, reduce your tax liability, or meet specific tax obligations, these 2024 tax tips will help you navigate year-end decisions effectively. By carefully considering strategies like deferring income, accelerating deductions, and boosting retirement savings, you can significantly reduce your tax liability and improve your financial health. Take advantage of these actionable tax strategies and ensure you’re fully prepared for the upcoming tax season.
Defer Income to 2025
Consider opportunities to defer income to 2025, particularly if you think you may be in a lower tax bracket in 2025.
You may be able to defer a year-end bonus or delay the collection of business debts, rents, and payments for services. Doing so may enable you to postpone payment of tax on the income until next year.
Accelerate Deductions in 2024
Look for opportunities to accelerate deductions into the current tax year.
If you itemize deductions, making payments for deductible expenses such as qualifying interest, state taxes, and medical expenses before the end of the year (instead of paying them in early 2025) could make a difference on your 2024 return.
Make Charitable Contributions
If you itemize deductions on your federal income tax return, you can generally deduct charitable contributions, but the deduction is limited to 50% (currently increased to 60% for cash contributions to public charities), 30%, or 20% of your adjusted gross income (AGI), depending on the type of property you give and the type of organization to which you contribute.
Excess amounts can be carried over for up to five years
Increase Withholding
If it looks as though you will owe federal income tax for the year, consider increasing your withholding on Form W-4 for the remainder of the year to cover the shortfall.
Time may be limited for employees to request a Form W-4 change and for their employers to implement it in time for 2024
The biggest advantage in doing so is that withholding is considered as having been paid evenly throughout the year instead of when the dollars are actually taken from your paycheck.
This strategy can be used to make up for low or missing quarterly estimated tax payments
Boost Your Retirement Savings
Deductible contributions to a traditional IRA and pretax contributions to an employer-sponsored retirement plan such as a 401(k) can reduce your 2024 taxable income.
If you haven’t already contributed up to the maximum amount allowed, consider doing so.
For 2024, you can contribute up to $23,000 to a 401(k) plan ($30,500 if you’re age 50 or older) and up to $7,000 to traditional and Roth IRAs combined ($8,000 if you’re age 50 or older)*
The window to make 2024 contributions to an employer plan generally closes at the end of the year, while you have until April 15, 2025, to make 2024 IRA contributions.
*Roth contributions are not deductible, but Roth qualified distributions are not taxable.
Ensure You Take Required Minimum Distributions (RMDs)
If you are age 73 or older, you generally must take required minimum distributions (RMDs) from traditional IRAs and employer-sponsored retirement plans.
Special rules may apply if you’re still working and participating in your employer’s retirement plan
You have to make the withdrawals by the date required — the end of the year for most individuals.
The penalty for failing to do so is substantial: 25% of any amount that you failed to distribute as required (10% if corrected in a timely manner).
Plan Year-End Investment Moves
You shouldn’t let tax considerations drive your investment decisions. However, it’s worth considering the tax implications of any year-end investment moves that you make.
For example, if you have realized net capital gains from selling securities at a profit, you might avoid being taxed on some or all of those gains by selling losing positions. Any losses over and above the amount of your gains can be used to offset up to $3,000 of ordinary income ($1,500 if your filing status is married filing separately) or carried forward to reduce your taxes in future years.
Taking charge of your tax planning now will help you make the most of 2024. By carefully considering strategies like deferring income, accelerating deductions, and boosting retirement savings, you can significantly reduce your tax liability and improve your financial health. Use these 2024 tax tips as a roadmap for proactive financial management, ensuring you end the year on a strong footing. Remember, thoughtful tax planning today will pay off with valuable savings tomorrow.
Contact your tax and financial advisors to determine the best moves for your situation.