End-of-Year Tax Strategy

At 30A Coastal Accounting it's time to start thinking about your 2024 tax strategy. The end of the tax year is December 31, 2024, which means any tax-saving actions must be taken before this date to impact your 2024 tax return. However, the actual tax filing deadline for individuals isn't until April 15, 2025. This gives you some time to file, but by preparing early, we can help minimize your tax liability and avoid any unforeseen surprises.

Here are some important end-of-year tax strategies to consider as we close out 2024. Also, at the end, you’ll find a FREE 2024 End-of-Year Tax Strategy Checklist to help you stay organized. 

1. Review Your Income and Expenses

Take a close look at your earnings and expenses for the year. If you're a business owner, a real estate professional, or a freelancer, having accurate, up-to-date financial records is key. Consider how your current tax bracket might be impacted by any upcoming income in the final months of the year, and whether it would benefit you to defer income until 2025. On the other hand, if you're expecting a lower income year ahead, you might want to accelerate earnings into 2024.

2. Maximize Retirement Contributions

One of the most effective ways to reduce taxable income is by contributing to retirement accounts. If you haven’t yet maxed out your contributions to a traditional IRA, 401(k), or other retirement savings plans, now’s the time to do so. For 2024, the contribution limit for a 401(k) is $23,000 (or $30,500 if you’re over 50). These contributions are tax-deferred, which can significantly lower your taxable income and help secure your financial future.

3. Review and Maximize Deductions

Ensure you're taking full advantage of all available deductions. Consider accelerating tax-deductible expenses, such as charitable contributions, medical expenses, or property taxes, into 2024. Additionally, if you’re a business owner, reviewing your expenses can help ensure you’re maximizing your deductions, whether it’s office supplies, travel expenses, or equipment purchases.

4. Harvest Tax Losses

If you have investments that have underperformed this year, consider selling those assets to offset capital gains from other investments. This strategy, known as tax-loss harvesting, allows you to reduce your taxable income by up to $3,000 annually, potentially reducing what you owe for 2024.

5. Assess Your Withholdings

If you’ve had a significant change in your financial situation this year—such as a raise, change in employment, or a new side business—now is a good time to assess whether you’ve withheld enough taxes throughout the year. Adjusting your withholdings now can help avoid an unexpected tax bill come April.

6. Donate to Charitable Organizations

Charitable donations are a great way to lower your taxable income while supporting causes you care about. Donations made by December 31, 2024, can be deducted on your 2024 tax return. Keep proper records of any donations, and remember, this can include both cash and non-cash donations, such as clothing or household items. Be sure to donate to qualified charitable organizations to claim the deduction.

7. Consider Timing of Income and Expenses

For those who are self-employed or own a business, timing is key. You may want to defer income into the following year if you expect to be in a lower tax bracket or accelerate business expenses into 2024 to maximize your deductions. This type of income-shifting strategy can provide more control over how much tax you pay for the year.

8. Prepay Certain Expenses

Certain deductible expenses, such as property taxes, medical expenses, and mortgage interest, can be prepaid before the end of the year to maximize your deductions. If you anticipate falling just short of the standard deduction, prepaying these expenses could allow you to itemize and receive a larger deduction for the year.

9. Review Tax Credits

Certain tax credits, such as the Child Tax Credit, Earned Income Tax Credit, and education credits, can significantly reduce your tax liability. Make sure you understand which credits you qualify for and gather any necessary documentation to claim them. If you’re eligible for any new credits, such as energy-efficient home improvements, make those investments before the year ends.

10. Review Your Withholdings and Estimated Payments

If you’ve had major life changes this year, such as getting married, buying a home, or starting a business, it’s a good idea to review your withholdings or estimated payments to ensure they’re accurate. Adjusting your withholdings now can help prevent surprises in April and ensure that you’ve paid enough throughout the year.

11. Organize Your Records

As the year ends, take time to organize all your tax documents, including W-2s, 1099s, investment statements, and any records for deductible expenses. This preparation will make the filing process much smoother and ensure you don’t miss any opportunities for tax savings. Creating a checklist now can save time and stress come tax season.

12. Take Advantage of Education Tax Credits

If you or a dependent are attending college or taking courses to advance your career, look into education-related tax credits, such as the American Opportunity Tax Credit or the Lifetime Learning Credit. These can provide significant savings and help offset the costs of tuition, fees, and even some related expenses.

13. Plan for Estimated Taxes

If you’re self-employed, run a small business, or earn substantial income outside of a regular paycheck, be sure to plan for your estimated taxes. The final quarterly estimated tax payment for 2024 is due on January 15, 2025. Failing to make these payments on time can result in penalties and interest, so make sure you have enough set aside to cover what you owe.

14. Consult a Tax Professional

Tax laws can be complex and change from year to year. Consulting with a tax professional is one of the best ways to ensure you’re taking advantage of all the deductions and credits available to you. As both a CPA and a real estate expert, I understand how important it is to approach tax preparation with foresight. Don't wait until April to start reviewing your financial situation; get ahead of the game by seeking advice now. By acting before December 31, 2024, and getting organized now, you’ll set yourself up for a successful filing in 2025.

At 30A Coastal Accounting Services, we’re here to help you navigate these strategies and ensure you’re fully prepared for the upcoming tax season. Whether it’s maximizing deductions, adjusting withholdings, or understanding which credits apply to you, our team of tax professionals can provide professional advice to make the most of your tax situation.

2024 End-of-Year Tax Strategies Checklist

To help prepare for the 2024 tax season use this checklist and help ensure you're maximizing your tax-saving opportunities before December 31, 2024:

✅ Review Your Income & Expenses

• Analyze your 2024 income and expenses.

• Consider deferring income or accelerating earnings depending on your tax bracket.

✅ Maximize Retirement Contributions

• Contribute to your retirement accounts (401(k), IRA).

• 2024 401(k) limit: $23,000 (or $30,500 for those over 50).

✅ Maximize Deductions

• Review deductible expenses (charitable contributions, medical expenses, property taxes).

• Accelerate deductible expenses if it benefits your tax situation.

✅ Harvest Tax Losses

• Sell underperforming investments to offset capital gains.

• Maximize tax-loss harvesting (up to $3,000 deduction).

✅ Review Withholdings & Estimated Payments

• Ensure your withholdings/estimated payments reflect 2024 earnings.

• Adjust withholdings if you've had significant financial changes.

✅ Donate to Charitable Organizations

• Make donations by December 31, 2024.

• Keep records and ensure donations are made to qualified charities.

✅ Time Your Income & Expenses

• Defer income or accelerate expenses depending on your 2025 expected tax bracket.

✅ Prepay Certain Expenses

• Prepay property taxes, mortgage interest, and medical expenses if it helps maximize deductions for 2024.

✅ Review Tax Credits

• Check eligibility for credits like the Child Tax Credit, Earned Income Tax Credit, and education credits.

✅ Organize Your Records

• Organize tax documents (W-2s, 1099s, investment statements, and deductible expenses).

✅ Take Advantage of Education Tax Credits

• Claim education credits like the American Opportunity Tax Credit or Lifetime Learning Credit.

✅ Plan for Estimated Taxes

• Ensure you’re ready to make the final estimated tax payment due on January 15, 2025.

✅ Consult a Tax Professional

• Reach out to 30A Coastal Accounting Services as your tax advisor for professional guidance.