ES: 2024 Year-End Tax Tips

Here are some things to consider as you weigh potential tax moves between now and the end of the year.

Defer Income to Next Year

Look for ways to defer income to 2025, especially if you expect to fall into a lower tax bracket. You may be able to postpone a year-end bonus or delay collecting business income, rent, or service payments. Deferring income allows you to delay paying tax until next year.

Accelerate Deductions

You can also look for opportunities to accelerate deductions into the current tax year. If you itemize deductions, paying deductible expenses before year-end may help. These expenses include qualifying interest, state taxes, and medical costs. Paying them in 2024 instead of early 2025 could reduce your 2024 tax bill.

Make Deductible Charitable Contributions

If you itemize deductions, you can generally deduct charitable contributions. The deduction is limited to 50% of adjusted gross income (AGI), or 60% for cash gifts to public charities. Other limits of 30% or 20% may apply, depending on the type of property and organization. You can carry forward excess contributions for up to five years.

Increase Withholding to Cover a Tax Shortfall

If you expect to owe federal income tax, consider increasing your withholding using Form W-4. This change can help cover any shortfall. Time may be limited for employers to process updates before year-end. The key benefit is that the IRS treats withholding as paid evenly throughout the year. This strategy can also help offset missed or low estimated tax payments.

Save More for Retirement

Contributions to a traditional IRA and pretax contributions to a 401(k) can lower your taxable income. If you have not reached the annual limit, consider increasing contributions. For 2024, you may contribute up to $23,000 to a 401(k), or $30,500 if you are age 50 or older. You may also contribute up to $7,000 to IRAs, or $8,000 if age 50 or older.*
Employer plan contributions usually must be made by year-end. You have until April 15, 2025, to make 2024 IRA contributions.
*Roth IRA contributions are not deductible, but qualified distributions are tax-free.

Take Required Minimum Distributions

If you are age 73 or older, you generally must take required minimum distributions from traditional IRAs and employer-sponsored plans. Some exceptions apply if you are still working. Most individuals must take distributions by the end of the year. Failing to do so can trigger a penalty of 25% of the undistributed amount. The penalty drops to 10% if you correct the error promptly.

Weigh Year-End Investment Moves

Tax considerations should not drive investment decisions. Still, you should review the tax impact of year-end trades. If you realized capital gains, selling losing investments may help offset those gains. Losses beyond your gains can offset up to $3,000 of ordinary income, or $1,500 if married filing separately. You can also carry unused losses forward to future years.

IMPORTANT DISCLOSURES

This material may address tax-related topics. It does not intend to serve as tax advice and cannot be used to avoid legal penalties. Each taxpayer should seek independent guidance from a qualified tax professional based on individual circumstances.

These materials provide general information for educational purposes only. They rely on publicly available sources believed to be reliable. However, we cannot guarantee their accuracy or completeness. Information may change at any time without notice.

Contact ETCPA today to learn ,2024 Year-End Tax Tips

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