First, let’s address the elephant in the room: The presidential election. I want to recognize that, in the aftermath, you might be on any point of the emotional spectrum – upset and fearful or happy and gratified.
Wherever you’re at post-election, remember: Your family, your friends, your vocation, and your mental health are the most important things to give your emotional energy to. These are the things you can actually directly impact and have some control over in your day-to-day.
Your tax situation is also one of those controllable things, but more on that in a moment.
Now, something a little merrier to focus on… Christmas is 44 days away, as of this writing (but who’s counting?).
(via GIPHY)
With only a month and a half to go, are you making plans for your Christmas gift-buying now? Black Friday will be here soon — has even started with early deals everywhere. You could save on your gift-buying by making a plan now. Planning always pays off.
The same is true with planning for your taxes. That’s why today I want to talk about some crucial year-end tax-saving moves.
The year is going to wrap up before we know it. And if you don’t act now, you could miss out on the benefit of a lowered tax bill (just like with Black Friday deals).
The time is now to make those tax-saving moves.
Imagine a less expensive Christmas season and tax season. For the former, I’ve done what I can to prepare you, my New York/New Jersey Metro friend. Consider yourself prepared.
For the latter, read on…
Year-End Tax Moves to Put Money Back In New York/New Jersey Metro Pockets
“The only difference between success and failure is the ability to take action.” – Alexander Graham Bell
With the holiday season almost here, taxes probably aren’t the thing you want to think about right now (or any season of the year, for that matter).
But, as I’ve said before – to win with tax savings, you need to take the proactive, not the reactive, approach.
What do I mean by that? Make moves now (before year-end) to maximize your savings and lower your tax bill. Because there’s not much you can do to change things once 2024 is over (with one or two exceptions).
You will be thanking your future self if you spend these next 6 or 7 weeks making smart year-end tax moves to ease your tax burden.
Here are the ones you can make that a lot of Brooklyn taxpayers overlook:
#1: Make your losses work for you.
If you’re sitting on some investments that haven’t been winners this year, you might be in luck. Tax-loss harvesting allows you to sell your underperforming investments at a loss to offset capital gains.
Start by tallying up the capital gains you made this year, then cash out capital losses of that same value. If those losses exceed your gains, you can offset up to 3k of your regular income on your 2024 tax return and carry over anything leftover to future tax years.
But be careful not to get tripped up by the “wash sale” rule: You can’t claim a loss on the sale of a security if you repurchase a reasonably similar security within 30 days before or after the sale.
#2: Exhaust retirement contributions.
For 2024, the 401(k) contribution limit is 23k (or 30.5k for those 50 and older). Reaching this maximum not only helps reduce your taxable income, but also can help you save on taxes in retirement (assuming that your tax rate will be lower in retirement than it is now).
My advice is to make this your priority for your year-end tax moves – especially if you’re 50 or older and have access to those extra catch-up contributions.
If you do manage to max out your 401(k), some plans even allow after-tax contributions above the standard limits (which grow tax-free and can be withdrawn tax and penalty-free).
And while the deadline for 401(k) contributions is the end of the year, IRA contributions that count towards your this year’s taxes can be made up until the tax filing deadline.
#3: Be SALT-y.
The state and local tax (SALT) deduction lets you deduct taxes like state income tax, property taxes, and sometimes sales taxes. The Tax Cuts and Jobs Act (TCJA) limited the SALT deduction to 10k per year (or 5k, for married filing separately). To take advantage of the deduction, you’ll need to itemize your deductions when you file rather than taking the standard deduction.
#4: Get extra generous.
With the gift tax exclusion, you can strategically reduce your taxable estate and transfer your wealth to future generations (which I highly recommend you do) – in 2024, the annual exclusion is 18k per recipient without incurring a taxable gift. And spouses splitting gifts can double that to 36k.
If you exceed the annual exclusion, you’ll need to file a gift tax return (IRS Form 709). Spouses always have to file this form, whether or not they exceed the annual exclusion, to allow them to elect portability. Meaning – a surviving spouse can “use” the deceased spouse’s unused lifetime exemption.
#5: Give back to what matters.
If you’re 70½ or older, consider a Qualified Charitable Distribution (QCD) from your IRA. As of this year, you can transfer up to 105k directly to a charity without it counting toward your adjusted gross income (which also helps reduce the tax hit from your required minimum distributions (RMDs)).
But don’t procrastinate on this – QCDs must be made directly by your IRA trustee. Be sure to contact them quickly so they’ll have time to complete the transaction before the end of the year (and read up on the IRS’s guidelines).
Of course, you know I’m here to walk you through the hows and whys of putting these year-end tax moves into action. But beyond that, my team and I want to see you achieve a greater sense of overall financial well-being in 2025. Let’s break down the steps you can take in the final weeks of this year to help you get there.
To setting yourself up for success,
Lillian Turner-Bowman