Comprehensive Year-End Tax Planning Strategies for 2024: Maximize Savings and Minimize Taxes
Comprehensive Year-End Tax Planning Strategies for 2024: Maximize Savings and Minimize Taxes
Blog Article
As the year comes to an end, it is imperative to review your financial situation and look intotax planning strategies that can help minimize your tax liability and maximize your savings. Proper year-end tax planning can indeed make all the difference in not only the ability to reduce taxable income but also increase deductions and set up plans far in advance for goals one has for their finances in the future. This guide covers key year-end tax planning strategies that can ensure you are reaping all financial opportunities available to you.
Reduce Your Taxable Income
Tax-Loss Harvesting
Tax-loss harvesting is selling those investments that have declined in value and using those losses to offset gains from other investments. This technique will help minimize your taxable income and, accordingly, enable you to claim up to $3,000 of capital losses against other kinds of income. When your losses are more than $3,000, you may carry over the losses to succeeding tax years.
Contribute to Tax-Advantaged Accounts
Boosting your contributions to tax-advantaged accounts is a great way to reduce your taxable income.
401(k) and 403(b) Plans: Contributions to retirement plans are pre-tax, reducing your taxable income. In tax year 2023, the contribution limit is $22,500, and an additional catch-up contribution of $7,500 for those ages 50 and older.
HSAs: HSA contributions are deductible; withdrawals for qualified medical expenses are tax-free. For 2023, the contribution limit is $3,850 for individual and $7,750 for family accounts. Additional catch-up contribution amounts apply: an extra $1,000 if you're 55 or older during the calendar year.
Traditional and Roth IRAs: A traditional IRA offers deductibility of contributions, while a Roth IRA provides tax-free growth and withdrawals. In 2023, the contribution limit for IRAs is $6,500, with a catch-up contribution of $1,000 available for those who are 50 years and above.
Max Out Charitable Deductions
Bunch Charitable Contributions
Bunching of charitable contributions means you bring forward several years' worth of contributions and merge them into one tax year, which brings you over the threshold for the standard deduction, allowing one to itemize and maximize their charitable deductions.
Donate Appreciated Assets
Donations of appreciated assets, like stocks or mutual funds, may have a double tax benefit: You won't have to pay capital gains tax on the appreciation, and you get to deduct the fair market value of the donated asset.
QCDs—Qualified Charitable Distributions: This tactic is accessible for those 70½ years or older. You can gift as much as $100,000 directly from your IRA to a qualified charity. The distribution would count toward your RMD and not be added to your taxable income. Read Full Article Here....