Last-Minute Tax Savings Before Year End
As the year draws to a close, it’s a great time to review your financial situation and identify potential tax-savings opportunities. In this video, I discuss some last-minute tax strategies that can help you decrease your tax liability.
If you have any questions or would like to discuss your specific tax situation, please don’t hesitate to contact us.
Transcript: Year-End Tax Strategies to Lower Your 2024 Tax Bill
Introduction: How to Save on Your 2024 Taxes
Hi, my name is Joe Dowdall, and I’m a financial planner at Worth Asset Management. As we approach the end of the year, I want to take just a few minutes to discuss some strategies you might want to implement to lower your 2024 tax bill.
What Is Tax Loss Harvesting and How Does It Work?
The first strategy I want to talk about is tax loss harvesting. Here’s how it works: you can sell investments at a loss and then deduct that loss from your taxable income. Basically, if you’re holding onto a losing investment, now might be the perfect time to sell it. Selling stocks at a loss helps you offset capital gains, which can lower your overall tax bill for the year.
Health Savings Accounts: Triple Tax Benefits You Shouldn’t Miss
Another great way to reduce your tax bill is to take advantage of a health savings account, or an HSA. If you have a high-deductible health insurance plan, contributing to an HSA allows you to benefit from triple tax savings.
What does that mean? Contributions are made pre-tax or are tax-deductible, earnings grow tax-deferred, and withdrawals for qualified medical expenses are tax-free.
For 2024, the contribution limits are $4,150 for individuals and $8,300 for families. If you’re over the age of 55, you can also make an additional $1,000 catch-up contribution. Since HSA balances roll over year after year, you don’t have to worry about spending the funds immediately—they can grow over time.
Should You Convert Your Traditional IRA to a Roth IRA?
Another strategy to consider is converting your IRA. If you had a lower income year in 2024, it might make sense to convert some or all of your traditional IRA to a Roth IRA.
By converting, you would pay income taxes on the converted amount at your 2024 rates, which could save you money on taxes in the future. Once funds are in a Roth IRA, they’re not subject to required minimum distributions, which allows them to grow without mandatory withdrawals.
Don’t Miss Your Required Minimum Distribution Deadlines
Speaking of required minimum distributions, if you haven’t yet taken your RMD for 2024, make sure you do so by the end of the year. If you’re over the age of 73, you’re required to take a minimum distribution from your retirement account, except for Roth IRAs.
Your first RMD must be taken by April 1 of the year after you turn 73, and subsequent RMDs are due by December 31 each year. Be mindful of these rules to avoid penalties for missed distributions. Also, if you have an inherited IRA, make sure you know whether you need to take a required distribution from that account.
How Retirement Contributions Can Help Lower Your Taxes
Another way to potentially reduce your tax bill is by optimizing your retirement account contributions. Contributing the maximum allowed by the IRS reduces your taxable income, which directly lowers your tax bill.
For example, in 2024, you can contribute up to $23,000 to your 401(k). If you’re over the age of 50, your yearly 401(k) contribution limit increases to $30,500. For IRAs, the contribution limit is $7,000, or $8,000 if you’re over age 50.
Closing Thoughts: Reach Out for Help with Your Taxes
My goal as a financial planner is to help my clients reduce their lifetime tax bill. These are just a few strategies you might be able to implement to lower your 2024 tax bill. If any of these strategies are confusing or seem complicated, please reach out—I’m happy to help.
You can contact me at 469-423-1989 or email me at joeatworthassetmgmt.com. I’m always happy to help in any way I can.