10 Important year-end tax tips for 2024

By Kathryn J. Clark

As the end of the 2024 tax year approaches, it’s a good time to review your financial plans and take steps to maximize your tax benefits.

Every taxpayer’s situation is unique, and the decisions you make now can have a significant impact on your current and future tax liabilities.

From contributing to tax-advantaged accounts to planning charitable giving, here are 10 essential tips to help you make the most of this tax season:

1. Contribute to tax-advantaged accounts

Maximize contributions to tax-advantaged accounts through these three methods:

• IRA Contributions: You can contribute to an IRA until you file your 2024 tax return, no later than April 15, 2025.
• Workplace Retirement Plans: Make final contributions by December 31, 2024. The maximum combined contribution for traditional and Roth accounts is $23,000, with an additional $7,500 allowed if you’re 50 or older.
• Health Savings Accounts (HSA): You can contribute up to $4,150 for self-only coverage or $8,300 for family coverage by April 15, 2025. HSA funds roll over, can be used tax-free for qualified medical expenses and are not subject to the “use it or lose it rule.”

2. Employ tax-loss harvesting

Use tax-loss harvesting to offset capital gains:

• Sell individual stocks, actively managed funds and exchange-traded funds at a loss to reduce taxes on capital gains.
• Remaining losses can offset up to $3,000 of other taxable income annually.
• Ensure transactions are completed by December 31, 2024.

3. Consider itemizing

Itemizing deductions might offer greater tax benefits:

• Deduct eligible expenses such as medical costs, home mortgage interest, state and local taxes, and charitable contributions.
• If medical expenses approach 7.5 percent of your AGI, consider paying bills before year-end.
• Alternatively, the 2024 standard deduction is $29,200 for married filing jointly and $14,600 for single filers.

4. Bunch charitable contributions

Optimize your charitable giving:

• Consolidate donations into a single year to exceed the standard deduction and itemize (you will skip the next tax year).
• You can deduct cash and property contributions up to 60 percent of your AGI.
• Using a donor-advised fund allows you to claim a 2024 deduction while distributing funds to charities over time.

5. Trim college costs with education breaks

Take advantage of education-related tax credits:

• American Opportunity Tax Credit: Provides up to $2,500 per student for qualified tuition, fees, and course materials if the student is enrolled for at least one academic period. It provides the greatest tax savings as it reduces tax dollar-for-dollar. Consider prepaying tuition to maximize the credit. For the 2024 tax year, the credit phases out at AGI of $160,000 for married joint filers and $80,000 for single filers.
• 529 College Savings Plans: Contributions may qualify for state income tax deductions, and any growth or distributions are tax-free if used for eligible education expenses. Gift up to $18,000 per beneficiary in 2024 without triggering federal gift taxes.

6. Defer some income

Manage taxable income by deferring revenue:

• For those taxpayers who have a Schedule C or other miscellaneous revenue streams, consider the timing of your year-end billing by deferring income to 2025 and limiting taxable income in 2024.

7. Make a Roth IRA conversion

Consider converting retirement funds:

• Convert traditional IRA, 401(k) or other qualified retirement plan funds into a Roth IRA to lock in lower tax rates now.
• While you’ll pay taxes on the converted amount, future withdrawals from the Roth IRA will be tax-free.

8. Don’t forget Required Minimum Distributions (RMDs)

Meet RMD requirements to avoid penalties:

• If you have an IRA, Required Minimum Distributions must start once you turn 73. Your first RMD is due by April 1 of the year after you turn 73, but subsequent RMDs are due by December 31 each year.
• Delaying the first RMD to April 1 could mean taking two distributions in one year, which requires careful tax planning.
• Failure to take an RMD results in a 25 percent penalty on the required amount.
• Note: RMDs increase your adjusted gross income and are taxed at the ordinary income tax rate.

9. Use RMDs for charitable contributions

Reduce taxes with qualified charitable distributions:

• Donate your RMDs from a traditional IRA directly to a qualified charity to lower your adjusted gross income (AGI).
• The annual maximum for a qualified charitable distribution is $105,000 per individual.
• This option is available starting at age 70 ½, even before RMDs are required at age 73.

10. Consider annual gifting

Lower your estate’s value through gifting:

• In 2024, you can gift up to $18,000 per recipient and that amount increases to $19,000 in 2025.
• While gifts don’t provide immediate tax deductions, they reduce future estate tax burdens.
• Gifts above the annual limit require filing Form 709 Gift Tax Return.

These strategies can help you maximize savings and minimize liabilities as the tax year comes to a close. The Boyer & Ritter team is ready to answer your questions and assist with your tax filings.

Kathryn Clark is a Manager with Boyer & Ritter. Kathryn’s emphasis is in tax and small business, providing tax and accounting services for businesses and individuals. Contact Kathryn at 717-761-7210 or kclark@cpabr.com.