Last Chance: 3 Smart Moves to Slash Your 2024 Taxes by Year-End!
As the year winds down and the festive season kicks into high gear, our thoughts naturally drift to family gatherings, holiday cheer, and, yes, the looming tax season. Wait, what? Taxes in December? That’s right, they’re not just a concern for accountants and financial gurus!
While you may not need to file until April, the clock is ticking. The actions you take between January 1 and December 31 will dictate your tax fate, so if you’re eager to slim down that tax bill, you’ve got until next Tuesday to get moving!
Don’t worry; you don’t have to be a millionaire or a charitable philanthropist to make a difference this tax season. Here are three savvy strategies that can benefit anyone, regardless of income level.
1. Amp Up Your 401(k) Contributions
Time is of the essence! You have until December 31 to max out your 2024 contributions to your 401(k) or similar workplace retirement account. And for those with individual retirement accounts, you can still contribute retroactively until April 15.
Here’s the deal: contributions to traditional plans (not Roth) are tax-deductible in the year you make them. This means every dollar you stash away now reduces your taxable income for 2024. You could contribute up to $23,000 in 401(k)—and if you’re 50 or older, there’s a sweet additional catch-up of $7,500!
2. Embrace Tax-Loss Harvesting
If you’ve dabbled in investing this year, chances are you’ve had both winners and losers. When you sell a winning investment, congratulations! But that also means you’ll owe capital gains tax. On the flip side, if your investments have tanked, don’t despair. You can strategically sell at a loss to offset those gains using a nifty tactic called tax-loss harvesting.
Sure, the rules can be complex, so consider chatting with a tax pro. Generally, you’ll first offset short-term gains with short-term losses, then roll over any excess losses to counter long-term gains. Got more losses than gains? You can deduct up to $3,000 from your ordinary income and carry the rest into the next tax year.
Just remember, don’t sell off a weak investment purely for the tax benefits. As a tax expert puts it, “Unless I need that loss soon, I could be limiting my options for future gains.”
3. Snag Those Tax Credits
If you’re eyeing some big-ticket purchases this holiday season, make sure you’re clued in on available tax credits. Certain expenditures, like new vehicles or home improvements, can lead to significant savings!
For instance, if you’re enhancing your home’s energy efficiency, you could snag a tax credit of up to 30% for qualifying upgrades, including energy audits, new windows, and HVAC systems. And if you’re planning to surprise your loved one with a shiny new ride, consider the tax credit for electric vehicles—up to $7,500 for new ones and $4,000 for used!
But tread carefully! Don’t rush into a purchase just for the sake of a credit. As one savvy accountant advises, “Buy because you want it, not just because of the tax break. Make sure it’s a good deal for you!”
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