facebook twitter instagram linkedin google youtube vimeo tumblr yelp rss email podcast phone blog search brokercheck brokercheck Play Pause
Mastering 2024: Your Comprehensive Guide to Tax Planning for the Year Ahead Thumbnail

Mastering 2024: Your Comprehensive Guide to Tax Planning for the Year Ahead

Happy New Year everyone! What a wild ride 2023 was. We had Russia invade Ukraine, war in the Gaza Strip, and (my personal favorite) Scandovol! After some much-needed time off to enjoy the holidays and clean my house, I’m back! Last year I talked about New Years resolutions and easy to implement ways to help yourself financially. If you missed it, or would like a refresher, you can check it out here. This year, I want to talk about tax planning. Tax laws change all the time and tax planning can be a crucial aspect of optimizing your financial strategy. As tax laws evolve and personal situations change, staying ahead of the game can lead to significant savings. In this post, we'll explore tax planning tips to help you navigate the year ahead with confidence.

  1. Stay Informed About Tax Law Changes: Tax laws are dynamic, and staying informed is key. Talk to your CPA or financial advisor about any recent modifications that might impact your financial situation. Keep an eye on the latest changes by subscribing to reliable financial news sources that can help keep you in the know.

  2. Maximize Retirement Contributions: Did you know the maximum allowable amount you can contribute to a retirement plan can change from year to year? Last year, the maximum contribution for a 401(k) was $22,500. This year it’s $23,000 (for anyone under age 50). Just because you maxed out your 401(k) last year doesn’t mean you will again this year. Knowing the contribution limits and contributing the max amount not only helps secure your future but can also reduce your taxable income for the current year.

  3. Leverage Health Savings Accounts (HSAs): If eligible, contribute to an HSA to cover qualified medical expenses. HSA contributions are tax-deductible, and the funds can be invested, offering a triple tax advantage. These contribution limits can also vary from year to year, so make sure you’re taking advantage of the maximum allowable amount for you.

  4. Explore Tax Credits: Investigate available tax credits, such as the Child Tax Credit or the Earned Income Tax Credit. These can significantly reduce your tax bill and potentially result in a refund. For example, even if you don’t normally file a tax return, you may still be eligible for the Child Tax Credit. Also, if you earned credit for qualified undergraduate, graduate, or professional degree courses, you might be eligible for the Lifetime Learning Credit. Talk to your CPA to see which credits may apply to you.

  5. Assess Your Investment Portfolio: Review your investment portfolio and consider tax-efficient strategies. If you need to make a withdrawal, long-term capital gains are typically taxed at a lower rate than short-term gains, so plan your investment moves accordingly. If you’re in a high tax bracket, talk to your financial advisor about tax-efficient investments and tax-loss harvesting.

  6. Plan for Education Expenses: If you have educational expenses, explore tax-advantaged accounts like 529 plans. If you have a young child or grandchild, you may be able to fund a 529 plan using your annual gift tax exclusion of $18,000/year (or frontload it with a $90,000 gift for 5 years). These accounts offer tax-free growth for qualified education expenses, providing a valuable advantage for parents and students.

  7. Evaluate Your Business Deductions: If you're a business owner, ensure you are maximizing your deductions. This includes business-related expenses, home office deductions, and any other eligible costs. The Tax Cuts and Job Act of 2017 made a lot of changes for taxes and deductions that may sunset in 2025. Keeping an eye on legislation that may change your current tax situation is critical to getting the most from your deductions and avoiding an audit.

As you embark on the journey of the new year, proactive tax planning can set the stage for financial success. By implementing these tips and staying informed, you can navigate the tax landscape with confidence, ensuring that your hard-earned money works for you. Remember, the key to financial mastery is not just earning money but optimizing how you manage it.

Remember, every financial journey is unique. If you have questions or need personalized guidance on implementing these strategies, don't hesitate to reach out – jennifer.jenkins@bluestonewp.com. Our team of experienced financial advisors is here to assist you in crafting a tax plan that aligns with your goals and maximizes your financial potential!