2024 is here, and with it comes a renewed focus on financial planning and, of course, taxes. While the future remains uncertain, one thing is clear: you can take control of your tax situation with proactive planning.
Here are seven key tax-smart moves you can make right now to potentially reduce your tax burden and keep more of your hard-earned money:
1. Seize Available Deductions:
- Embrace higher standard deductions: Enjoy potentially lower taxes thanks to wider tax brackets and increased standard deductions, which offer a simpler way to claim write-offs without itemizing.
- Consider itemizing strategically: If your itemized deductions exceed the standard deduction, consider “bunching” them into 2024 to maximize your write-off.
- Leverage charitable donations: Donate appreciated assets directly to qualified charities and deduct their fair market value without paying capital gains tax.
2. Make the Most of Saving Incentives:
- Maximize IRA contributions: Contribute up to $7,000 ($8,000 for those 50+) to IRAs for 2023 tax benefits. Consider Roth conversions if investments are down to potentially convert more shares for the same tax bill.
- Boost HSA contributions: Take advantage of increased HSA contribution limits for self-only and family coverage. Catch-up contributions for those 55+ are also available.
- Leverage 529 plans: Contribute up to $18,000 ($36,000 for married couples) to tax-advantaged 529 plans for education expenses.
3. Put Your Savings to Work Tax-efficiently:
- Choose tax-efficient investment locations: Hold income-generating assets like bonds and CDs in tax-deferred accounts like IRAs, while holding stocks (taxed at lower capital gains rates) in taxable accounts.
- Consider managed accounts: If you lack the time or expertise, consider managed accounts that handle tax-efficient asset location for you.
- Utilize charitable strategies: Bunch donations to maximize potential deductions or consider qualified charitable distributions from your IRA.
4. Implement Tax-Loss Harvesting:
- Offset gains with losses: Sell investments with losses to offset capital gains and potentially reduce your tax bill (up to $3,000 of ordinary income). Be mindful of wash-sale rules.
- Explore cryptocurrency tax implications: While wash-sale rules don’t apply to crypto yet, legislation may change this. Work with a tax professional to stay informed.
5. Stay Current on Estate Planning:
- Act before TCJA provisions sunset: Estate and gift tax exclusions may revert to pre-2017 levels by 2026. Consider accelerating gifting or donating appreciated assets now.
6. Do Regular Financial Checkups:
- Use the IRS withholding estimator: Ensure you’re withholding the right amount of taxes throughout the year.
- Claim all eligible deductions and credits: Thorough bookkeeping helps you maximize your tax advantages.
- Review residency options if working remotely: Long-term remote work may impact your residency and tax obligations. Consult a professional for guidance.
7. Seek Professional Help:
- Consult a tax advisor and financial professional: They can help you create a personalized tax-smart investing plan that optimizes your financial future.
Remember:
Tax planning is an ongoing process, not a one-time event. By taking these proactive steps now and staying informed throughout the year, you can put yourself in a better position to minimize your tax burden and maximize your financial well-being.
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