As 2024 comes to a close, it’s the perfect time to review your finances and take proactive steps to reduce your tax bill. Here are some strategies to help you save before the year ends:
1. Maximize Contributions to Retirement Plans
Take full advantage of your workplace retirement plan. For 2024, you can contribute up to $23,000 to your 401(k) or similar plan—or $30,500 if you’re age 50 or older, thanks to the catch-up provision. Contributions lower your taxable income and build long-term savings.
If your income has dropped this year, consider converting a traditional IRA to a Roth IRA. This allows you to pay taxes at a potentially lower rate now and enjoy tax-free growth and withdrawals later.
2. Review Your Payroll Withholding
Avoid surprises when tax season rolls around by checking your payroll withholding. If you’ve underpaid, adjusting your withholding now can help prevent penalties. Tools like the IRS Withholding Estimator can guide you in determining the correct amount.
3. Defer Income to 2025
If you’re self-employed or have control over the timing of income, consider deferring payments until 2025 to lower your 2024 taxable income. This strategy works best if you expect to be in the same or lower tax bracket next year. Discuss this with your tax advisor to ensure it aligns with your overall financial strategy.
4. Invest in a New Business Vehicle
If your business needs a new vehicle, purchasing one before year-end can provide significant tax benefits. Vehicles with a gross vehicle weight rating (GVWR) between 6,001 and 14,000 pounds may qualify for a Section 179 deduction of up to $30,500 in 2024. Additionally, bonus depreciation is still available but has decreased to 20% this year. Make sure the vehicle is in service before December 31 to qualify.
5. Hire Your Kids
If your children work in your business, consider putting them on payroll. You can pay them up to $14,600 in 2024 without triggering income tax, as it falls within the standard deduction. This allows you to reduce your taxable income while teaching your kids financial responsibility. They can also use their earnings to fund a Roth IRA for their future.
6. Harvest Tax Losses
Review your investment portfolio for underperforming assets. Selling these at a loss can offset capital gains and reduce your taxable income by up to $3,000. Just be mindful of the wash-sale rule, which prevents repurchasing the same or substantially identical investments within 30 days.
7. Fund a Health Savings Account (HSA)
If you’re enrolled in a high-deductible health plan, HSAs offer triple tax benefits: contributions are tax-deductible, growth is tax-free, and withdrawals for qualified medical expenses are tax-free. For 2024, contribution limits are $4,150 for individuals and $8,300 for families, with an additional $1,000 catch-up contribution for those aged 55 and older.
Year-end tax planning is crucial to maximizing savings and preparing for the future. These strategies can help reduce your tax burden and set you up for success in 2025.
At Elite Tax Partners, we don’t just prepare tax returns—we build proactive, customized tax strategies designed to save you money and grow your wealth. Don’t leave your tax savings to chance. Our expert team specializes in helping business owners like you navigate complex tax laws, maximize deductions, and create financial peace of mind.
Time is running out to make a difference for 2024. Let’s take action together to ensure you’re not overpaying a single dollar to the IRS. Contact us today to schedule your Tax Strategy Session and finish the year strong. Call now 951-633-1040 or visit EliteTaxPartners.com to book your consultation.
Your success is our mission. Let’s make 2024 your most profitable year yet!