Year-End 2024 Tax Planning: Make Smart Moves Before the Ball Drops

As we say goodbye to 2024, it’s time to get serious about tax planning. Major life events, new laws, and investment opportunities all play a role in your financial picture.

Taking some time now to review your taxes could mean a lighter load when filing season arrives. Here are the smart moves to make before the year ends.

How Life’s Big Moments Impact Your Taxes

Major life changes can come with a few extra forms to fill out. Whether you’re tying the knot, welcoming a new family member, or making career moves, these events often shift your tax landscape.

• Marriage or Divorce: Combining or separating incomes can move you into a different tax bracket. Don’t forget to adjust your withholdings, so you’re not caught off guard.
• New Baby: Along with diapers and midnight feedings, a new baby comes with some tax benefits. Take advantage of the Child Tax Credit and deductions to help reduce your taxable income.
• Job Changes: A new job or a big promotion might boost your salary, but it could also mean more taxes. Now’s the time to review your withholdings to avoid a larger bill in April.
• Starting a Business: If you’ve gone the entrepreneurial route, your taxes just got more complicated. Be sure to track your deductible expenses and plan for self-employment taxes.

Gifts: Spread Cheer Without Spreading Your Tax Bill

Giving gifts is great, but let’s not forget that the IRS keeps an eye on those big presents. Luckily, there are a few exclusions to keep your generosity from leading to a tax headache.

2024 Annual Gift Tax Exclusion

You can give up to $18,000 per person without worrying about gift tax. For married couples, that amount doubles to $36,000 per recipient. Keep your gifts under these thresholds, and you’ll avoid any unwanted IRS attention.

Capital Gains and Losses: Offset for the Win

When it comes to investments, timing is everything. If you’ve sold some winners this year, don’t forget to offset those gains with any losses.

You can deduct up to $3,000 in capital losses against your ordinary income, which can help ease your tax burden.

Plus, shifting gains to lower tax brackets can keep more of your profits in your pocket.

529 Plans: A Smart Move for Future Education

Whether you’re saving for college or private school, 529 plans offer tax advantages you don’t want to miss.

While contributions aren’t deductible on your federal return, the growth is tax-free when used for qualified education expenses. And depending on your state, you might even score a tax deduction for contributing.

One of the recent changes to 529 college savings plans is that money can now be converted into a Roth individual retirement account tax-free after 15 years, adding even more flexibility to these plans.

Roth IRA Conversions: Now or Later?

Thinking about converting a Traditional IRA to a Roth IRA? You’ll pay taxes on the amount you convert, but the long-term reward is tax-free withdrawals in retirement.

It’s a smart move if you expect to be in a higher tax bracket down the road or if you think taxes are going up in general.

Telework, Taxes, and Staying Safe

If you’re one of the many working remotely, be aware that telework can bring new state tax obligations. You might owe taxes in more than one state, depending on where you live and where your company is located.

And while you’re thinking about taxes, don’t forget about fraud. Tax-related identity theft is still a real threat, so stay alert for phishing scams and fake IRS communications.

The IRS won’t email or text you for personal info—ever.

Retirement Accounts and HSAs: Maximize Your Benefits

Before the year ends, take a look at your retirement accounts and health savings accounts (HSAs). Contributing the maximum allowed can help you save on taxes now and set you up for a more comfortable future.

Plus, HSA funds roll over each year, making them a great way to save for both medical expenses and retirement.

However, don’t confuse HSAs with Flexible Spending Accounts (FSAs), which often operate under a “use-it-or-lose-it” rule. With FSAs, any unused funds typically expire at the end of the year unless your employer allows for a limited rollover or grace period.

Wrap-Up: Don’t Wait Until the Last Minute

As you close out 2024, don’t forget to check off your tax planning to-dos. A few thoughtful steps today can lead to a smoother tax season tomorrow—and possibly a bigger refund or smaller tax bill. Here’s to starting 2025 with your financial house in order.