The beginning of 2024 is just the right time to generate your tax strategy. Whereas you might wait until you reach tax season to execute, the fewer choices mean the better, so waiting until now to act means you have reduced your tax burden, thereby increasing your savings. Year-end tax planning is all about moving your money around to reduce the amount of taxable income on your hands, taking all the deductions available, and preparing your finances for another year. To help you through your 2024 year-end tax planning maneuvers here is a guide.

2024 Year-End Tax Planning Moves To Make Now

Here are some key 2024 year-end tax planning moves to consider before the clock runs out.

Maximize Retirement Contributions

Contribution to a retirement account is one of the easiest and most effective ways to reduce your taxable income. You can also contribute pre-tax dollars into traditional IRAs and 401(k)s and have your year's taxable income decreased. If you're under 50, you can contribute $20,500 to a 401(k) for 2024; if you're 50 or older, that number rises to $27,000. You can contribute as much as $6,000 a year, or $7,000 if you are 50 or older, to an IRA.

If you haven't yet hit the maximum number of contributions allowed into your retirement account, increasing your contributions before the end of the year is a great way to lower your taxable income. And, these contributions are tax deferred, meaning they grow tax deferred until you withdraw them, so you're compounding your money and paying less tax right now.

If you're self employed, then think about contributing to a Solo 401(k) or SEP IRA. Both options offer higher contribution limits than traditional IRAs, allowing you more opportunity to lower your taxable income.

Take Advantage of Tax Deductions

Another part of what we do for our clients is year end tax planning, which brings us to the deductions for taxes. A direct reducer of the amount of income subject to taxation, that is a big part of tax deductions. But the deductions are divided into several categories: those that anyone can claim and those available on the basis of one's own financial situation. A good time to review any possible deductions is before the end of 2024.

Say, you are a home owner, then you can deduct mortgage interest and property taxes on your federal return. If you itemize your deductions, that doesn't mean you can't deduct medical expenses, state and local taxes, and charitable donations. Also, it's a good time to check in on your charitable giving strategy. By giving before the year is out you can enhance your chances of deducting more in your tax bill.

If you've been delaying some deductible expenses (medical treatments, home improvements, etc.) it may be worth accelerating those expenses into 2024, in order to take advantage of the higher deductions for 2024. But, just make sure to have good records and receipts to prove these expenses.

Harvest Investment Losses

If you have taxable investment accounts, another important move to consider is tax-loss harvesting. This strategy involves selling investments that have lost value to offset any capital gains you may have earned during the year. By realizing these losses, you can reduce your taxable income. If you don't have enough capital gains to offset, you can use up to $3,000 of your net losses to reduce your ordinary income.

Tax-loss harvesting can be particularly useful if your investment portfolio has taken a hit in 2024. But make sure you're not just selling for tax reasonsthis should be a strategy that fits into your overall investment plan. Also, be mindful of the IRSs wash-sale rule, which disallows claiming a loss on the sale of an investment if you repurchase the same or substantially identical investment within 30 days.

Plan for Required Minimum Distributions (RMDs)

If you're over 72 and have a traditional IRA or 401(k), youre required to take a minimum distribution from your retirement accounts each year. These Required Minimum Distributions (RMDs) are taxable and can increase your tax bill, so its important to plan for them.

RMDs can be a particularly significant factor for taxpayers who have a large retirement account balance. If you dont need the money, you might consider giving some of it to charity. The IRS allows taxpayers who are over 70 to make direct charitable contributions from their IRAs, which can satisfy the RMD requirement without increasing taxable income.

Alternatively, you can also explore other tax-advantaged ways to withdraw from retirement accounts. For example, if youre still working and contributing to a 401(k), you may be able to delay RMDs from that plan. Its also a good time to review your other retirement planning options to determine if there are ways to minimize taxes on future distributions.

Review Your Tax Withholding

As 2024 comes to a close, its also a good idea to review your withholding status. Many people end up with a large refund at tax time because they had too much withheld throughout the year. While getting a refund may feel like a windfall, it essentially means youve been overpaying the IRS throughout the year.

On the other hand, if you owe a significant amount at tax time, it may mean that you didnt have enough withheld from your paycheck. In either case, reviewing your withholding now gives you the chance to make adjustments for the next year.

If youve experienced any major life changes in 2024such as getting married, having a child, or starting a businessyour tax situation may have shifted. Make sure your withholding reflects those changes so you arent caught off guard at the end of the year.

Conclusion

Taking the time to plan for your taxes before the end of the year can lead to significant savings, both in terms of reducing your taxable income and maximizing deductions. By reviewing your retirement contributions, making charitable donations, harvesting investment losses, and considering your RMDs, you can set yourself up for a more favorable tax situation for 2024. Additionally, staying on top of your tax withholding ensures that you're neither overpaying nor underpaying throughout the year.