Tax Tips to Lower Your 2024 Tax Bill Before It’s Too Late

Hey everyone, I'm Phil Clark, founder of OmniStar Financial Group, and I want to welcome you back to We're Talking Money and let you know that today we're going to dive into something that literally could save you thousands of dollars, and it's year-end tax planning. And you only have a few weeks to get this done. We have tax cuts that are set to expire at the end of 2025, so really the clock is ticking for you to grab every tax break that you can before 2024 is in the rear view mirror.

So let's jump into some of these tips, things that you can use right now to be sure that you are minimizing your tax bill. First, it's tax-advantaged accounts. So you want to maximize those tax-advantaged accounts. This year you can contribute up to $23,000 to your 401k or a 403b. You have to do that by December 31st. And if you're 50 or older, you can add an extra $7,500 in catch-up contributions. That's a huge benefit.

And if you don't have those types of plans available to you, you can always use an IRA. Now, it doesn't give you the same amounts, they're not as large, but still it's something that you can use. And heck, if you can afford to do it, you might be able to use both. You have until April 15th 2025 to fund the IRA. I always say, why wait? Get it done.

Oh, and don't forget about HSAs, or health savings accounts. Those contributions reduce your taxable income, and the withdrawals from those accounts for medical expenses, they're always going to be tax-free.

Now let's talk about turning some losses into gains. So maybe this year you've had some losing investments. There's always some that have done poorly. So you can take those losses and harvest them to your advantage. We call it tax-loss harvesting. So what you do is you sell underperforming investments to help offset some of the capital gains that are coming from equities that have performed so well. You can take up to $3,000 of losses off of your ordinary income, or if you're offsetting capital gains, you can use as much as you want to.

But one thing to be careful of is something called the wash sale rule. So if you sell a security for a loss and rebuy that same asset within 30 days, it could void the tax benefit. So be careful. Now, what's the exception? Cryptocurrencies. There is no wash sale rule when it comes to that type of investment, but you always want to consult your tax guide just in case.

Now let's talk about Roth conversions. So if you're thinking long-term, a Roth conversion could be a really smart move. You'll pay taxes now, yes, but once you make this conversion, your money grows tax-free. And when you reach that ripe old age in retirement that requires a minimum distribution, you get to ignore that. They're not required when it comes to a Roth. So converting from traditional IRA to a Roth IRA could be a huge benefit.

Despite what President Trump is hoping to do... "It is vital that we reduce the crushing tax burden on our companies and on our workers." I still believe that taxes will rise, simply because our country has an incredible debt crisis that's getting worse every year. Converting while rates are lower could save you a lot of money as it relates to these conversions.

Let's move on to the next point. We call this one bunching. So if you're charitably inclined, you're taking several years where you would normally make a smaller contribution and you're rolling those into one year. And what this does is it allows you to itemize. That means you're going well above the standardized deduction, and that means savings on your tax return.

Now, donor-advised funds, that's another great option. So if you're not sure which charities that you want to give to right now, you can put it in the donor-advised fund and then make choices down the road as to where that money will go. And while you wait, the money is invested. It can grow and make even more money for you to give to your favorite charities.

Okay, next I want to talk about optimizing education and gifting. Now, I know this one is not going to lower your tax bill today, but it does have some solid long-range effects. College expenses or gifting, when those things are on your mind, you want to talk about or think about a 529 plan. The American Opportunity Tax Credit, it offers up to $2,500 per student, so that's a nice benefit.

And then $52 9 plans, sometimes, depending on your state, there could be a deduction for the contribution. But more importantly, you can give up to $118,000 per year per recipient. So that's right now in 2024, and it's tax-free as it relates to you gifting it, and it's tax-free to the recipient. And if you park it in a 529 plan, the growth on that money will always be tax-free when it's distributed for qualifying education expenses. And it doesn't just have to be college anymore. Can be any number of things associated with simply education, so keep that in mind.

Okay, so let me give you a few other quick tips. First, you can try to defer some income. Maybe if you're a freelancer or $199 type contractor, you can delay income that might be owed to you in December, push it out until January. The people that owe you will probably be pretty happy about that, and it will keep you from adding more money that ultimately creates more tax to your current tax return.

Next, you can donate, again if you're charitably inclined, appreciated assets. Now, this is a really powerful play. What it allows you to do is, for any stock, you could skip all the capital gains taxes. If you were going to sell those stocks and make a donation, don't sell it. Just give the charity the stock, the appreciated stock. So you avoid the capital gain, make a larger gift potentially, and you get to take advantage of the deduction based on the amount the stock is worth when you gave it.

Next, review your medical expenses. Anytime that your bills for medical expenses surpass 75% of your adjusted gross income, you can deduct it.

So there you have it, a number of ways to lower your 2024 tax bill and set yourself up for success in the years ahead. If you want to find out more, reach out to us via OmniStarFinancial.com. We're happy to take a look at whatever you're trying to accomplish and perhaps offer more in-depth strategies that can take your tax return to an even better place. Whatever you're doing as it relates to your taxes, consult with the tax advisor or financial planner to be sure that any changes you make are tailored to your situation.

Now, if you don't mind, hit that subscribe button and turn on the notification so you never miss an opportunity to make some smarter financial decisions. And as always, let's keep talking money, and I'll see you next time.