As the year begins to wind down, now is the perfect time to take stock of your finances so you can make strategic moves that reduce your tax liability - or could even turn a potential payment into a refund. The single most powerful way to optimize your financial outlook and set yourself up for success in the coming year is to invest in proactive year-end tax planning, alongside decorating and getting ready for the holidays. If you want to make sure you're prepared before tax season hits, here's a closer look at how to meet your goals.
Should You Take the Standard Deduction or Itemize?
Every taxpayer faces the decision between taking the standard deduction or itemized deductions. The choice can make a big difference in your tax savings.
For 2024, the standard deduction amounts are:
- Single Filers: $14,600
- Married Filing Jointly: $29,200
If your eligible expenses, like mortgage interest, charitable donations, or medical bills, add up to more than the standard deduction, itemizing may save you more money. Reviewing your expenses now can help you decide which option works best for you this year.
Retirement Contributions Can Lower Your Taxable Income
Contributing to retirement accounts helps you save for the future and can lower your taxable income today. By making contributions before December 31st, you could qualify for significant tax savings.
- 401(k): Contribute up to $23,000 in 2024, with an additional $7,500 allowed if you're 50 or older.
- Traditional IRA: Contributions of up to $7,000 ($8,000 for those 50 or older) may be tax-deductible, depending on your income and whether you're covered by a workplace plan.
The sooner you make these contributions, the more they can work to your benefit.
Make the Most of Charitable Giving
The holiday season inspires many to give back, and those donations can also provide valuable tax benefits. Contributions to qualified charities are tax-deductible if you itemize, but you need to act before December 31. Be sure to keep receipts for all donations to make filing easier.
Take a Look at Medical Expenses
If your medical bills for the year exceed 7.5% of your adjusted gross income, those costs may be deductible if you itemize. If you're close to the threshold, you could consider scheduling additional appointments or treatments before year-end to maximize this deduction.
Plan Ahead with Investment Gains and Losses
If you've made gains in your investment portfolio this year, selling underperforming assets is an actionable way to offset those gains. Tax-loss harvesting can help lower your taxable income but requires careful planning to execute correctly. Consulting with a tax professional is essential for tax-loss harvesting.
Why Now Is a Great Time to Meet with Your CPA
There's no better time to schedule a tax planning meeting with your CPA. By reviewing your financial situation now, you can avoid surprises when tax season rolls around. A CPA can help you:
- Evaluate whether to take the standard deduction or itemize.
- Make the most of retirement contributions, charitable giving, and other tax-saving strategies.
- Ensure you're on track to meet your financial goals.
Myrick CPA works entirely online, making it easy to upload your documents through our secure client portal. Whether you're working with paper or digital files, scanning and organizing your records now will save you time later and make for a smoother filing process.
Plan Now, Save Later
Preparing for tax season early is one of the best ways to reduce stress and keep more of your hard-earned money. Whether it's maximizing deductions, contributing to retirement accounts, or managing your investments, the right moves today can make a big difference when tax filing season hits.
Do you need more information on how to get started on a tax strategy that could keep more money in your pocket? Contact Myrick CPA to schedule a consultation and make the most of your year-end tax planning.
