2024 December InMaricopa Magazine

BUSINESS

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12 ways to lower your tax bill in 2024

BY CHRIS J. SCOGGIN, CPA A S THE END OF THE YEAR APPROACHES, the clock is ticking for important choices that could help lower your tax bill for 2024. Here are a dozen tax tips to consider before year-end to help trim your 2024 tax bill — and set you up for success in the years ahead. 1 Contribute to tax-advantaged accounts. While you have until the tax filing deadline of April 15, 2025, to contribute to an IRA for the 2024 tax year, you must make your final contributions to most workplace retirement plans, such as a 401(k) or 403(b) by Dec. 31. You can contribute up to $23,000 in total combined traditional and Roth contributions. If you’re 50 or over, you can make additional catch-up contributions of $7,500. 2 Turn investment losses into tax gains. Even with market gains in 2024, it’s possible you lost money on some investments this year. But you can take some of the sting out of those losses by tax-loss harvesting. This strategy generally allows you to sell investments that are down, replace them with reasonably similar investments and then use those losses to offset realized investment gains. Any remaining losses can be used to offset realized gains in future years and up to $3,000 ($1,500 if married but filing separately) of ordinary income each year. 3 Consider a Roth conversion. A Roth conversion involves transferring money in a traditional IRA or workplace plan to a Roth IRA. You’ll pay taxes on the converted amount, but then the money has growth potential and can be withdrawn tax-free, and it isn’t subject to required minimum distributions for the life of the owner. 4 Consider itemizing. There are five main categories of itemizable deductions, subject to various limitations, and if these categories add up to more than the standard deduction, you may want to itemize. For 2024, married couples have a standard deduction of $29,200 and single filers a standard deduction of $14,600. Generally speaking, you can deduct

medical expenses, home mortgage interest, state and local taxes, charitable contributions, and theft and casualty losses due to a federally declared disaster. 5 Trim college costs with education breaks. The American Opportunity Tax Credit provides a dollar-for-dollar credit on a portion of qualified education expenses paid for an eligible student for the first four years of higher education. The full $2,500-per-student credit requires $4,000 in qualified spending and is available to people whose modified AGI is less than $80,000 for single filers and less than $160,000 for joint filers. To make the most of this break, you might want to consider prepaying the first semester of 2025 before Dec. 31. 6 Defer some income. If you have independent contractor, freelance or other gig income, you might consider delaying billing for your services until early next year, thereby limiting your taxable income this year. Be sure to work with your accountant to create the best plan. 7 Bunch charitable contributions. Bunching means concentrating charitable deductions in a single year and skipping the following year, or even several years. If you follow this strategy, you wouldn’t likely claim charitable deductions in the following year, but you’d still qualify for the standard deduction. 8 Donate appreciated assets. Itemizers can also donate appreciated assets held longer than one year to a qualified public charity and deduct the fair market value of the asset without paying capital gains tax. Exceptions may include personal property owned less than one year, and publicly traded stock and mutual funds. 9 Don’t forget contributions of cash and property. Itemizers can deduct cash contributions as well as property — think the table you donate to your local school — up to 60% of your AGI. In addition to determining the fair market value of donated items, the IRS

requires different types of documentation based on the size of the donation. 10 Consider gifting to loved ones. You can gift up to $18,000 per recipient to as many people as you like. (This amount increases to $19,000 in 2025.) So, if you have four children, you can give $18,000 to each one. (If you’re married, each person in the couple can gift this amount.) While you don’t get an income tax deduction for such gifts, the recipient won’t owe taxes, and the gift can help reduce the value of your estate without using up your lifetime gift and estate tax exemption. 11 Don’t forget RMDs. If you’re 73 or older, you have until Dec. 31 to take your required minimum distribution, or RMD, from traditional IRAs, 401(k)s and other qualified retirement plans. This is an important deadline: Missing it can result in a hefty penalty of 25%, reduced to 10% if the distribution is taken within two years of the required RMD. 12 Trying to reduce your RMD? Consider giving it to charity. You can make a qualified charitable distribution (QCD) from an IRA of up to $105,000 per individual, as long as the charity receives your donation by Dec. 31. The money you donate is not deductible but it’s not subject to federal taxes, qualifies as your RMD for the year (assuming it meets or exceeds your RMD amount) and you can make one even if you don’t itemize deductions. QCDs are also allowable starting at age 70½, so you don’t have to wait until you’re 73 to take advantage of one. If you would like to discuss a customized tax reduction plan, please call Chris Scoggin, CPA, Managing Director of CS CPA Group at 520-568- 3303 before Dec. 31.

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