Year-End Tax Planning: What Individuals Should Expect for the 2024 Tax Year

As the end of 2024 approaches, individuals should begin planning to optimize their tax positions for the upcoming year. Year-end tax planning offers opportunities to minimize tax liability, maximize deductions, and prepare for any changes in tax laws. Working with a professional accountant can help individuals navigate the complexities of the tax code, ensuring they make the most of available benefits and avoid surprises during tax season. This article guides key areas for year-end tax planning in 2024, empowering individuals to secure financial stability and tax efficiency. 

Strategic Income Planning 

Understanding and managing your income is a cornerstone of effective tax planning. Adjusting the timing of income and deductions can have a significant impact, particularly if you anticipate changes in your tax bracket. For example: 

• Deferring Income: If you’re in a high tax bracket this year but expect a lower one next year, consider deferring bonuses or other income to 2025. 

• Accelerating Deductions: If your income is expected to rise next year, making charitable contributions or prepaying deductible expenses in 2024 can lower your taxable income. 

• Maximizing Deductions: Reviewing deductions is a key component of year-end tax planning. Common deductions include mortgage interest, state and local taxes, and charitable contributions, but eligibility and limits can vary. 

• Charitable Contributions: Ensure your donations meet IRS requirements. Proper documentation can enhance the tax benefits of your generosity. 

• Medical Expenses: Significant out-of-pocket medical costs exceeding a certain percentage of your income may be deductible. Our team can help calculate these expenses and determine the optimal timing to claim them. 

Investment Strategies 

Investment planning is another critical area for reducing tax liability. Techniques like tax-loss harvesting can help offset capital gains with losses, minimizing taxable income. 

• Selling Underperforming Investments: This strategy can reduce your tax burden and realign your portfolio for future growth. 

• Leveraging Long-Term Gains: If you’re in a lower tax bracket, you may qualify for a 0% rate on long-term capital gains. Now may be an excellent time to realize gains before potential tax rate changes. 

Retirement Contributions 

Maximizing contributions to retirement accounts like IRAs and 401(k)s can reduce taxable income and set you up for a secure future. Consider: 

• Traditional vs. Roth Accounts: Deciding between pre-tax and post-tax contributions depends on your current and expected future tax rates. 

• Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs): Fully funding these accounts can provide immediate tax advantages and help offset medical expenses. 

Addressing Major Life Events 

Significant life changes—such as marriage, divorce, the birth of a child, or buying a home—can greatly impact your tax situation. These events may influence deductions, credits, and filing status. 

For example: 

• Marriage or Divorce: Filing jointly or separately affects your deductions and tax rates. 

• Homeownership: Mortgage interest deductions and energy-efficient home improvement credits can lower your tax liability. 

Staying Ahead of Tax Law Changes 

Tax laws are constantly evolving, and staying informed is essential. Changes to tax brackets, deductions, or credits can impact your planning. For example: 

• Energy-Efficient Home Improvements: Some credits may expire or be modified. Acting now ensures you take advantage of current provisions. 

• Tax Bracket Adjustments: Strategic planning can help you prepare for new thresholds. 

Our team keeps up with the latest legislative updates to help you adapt your strategies and make informed decisions. 

Let Tonneson + Co Be Your Trusted Tax Partner 

Year-end tax planning is an essential step toward reducing your tax liability, maximizing benefits, and setting the stage for a successful 2024. With the right strategies, tailored to your unique financial situation, you can achieve greater financial stability and peace of mind. 

At Tonneson+Co, our tax advisors are ready to help you navigate these complexities. Whether you have questions or need comprehensive guidance, we’re here to support you every step of the way. 

Contact us today to start your year-end tax planning and ensure you’re fully prepared for the upcoming tax season.