Year End Tax Advice

By Ben Young

Astute Wealth Management

Tax strategy is an overall plan with annual reviews that are updated to synchronize your goals with the ever-changing array of federal and state tax reporting regulations. Year-end tax planning is focused on making the best possible moves to minimize the tax burden to the greatest extent of the law in the remaining time.

Thus, there is still time to make certain you are conferring with your tax advisor and taking steps to lessen your 2024 tax bill.

The keys to success are understanding the categories available to you to take advantage of such as business expenses and perhaps losses, investment gains vis a vis potential losses, management of Traditional Simple/SEP and Roth IRA contributions and/or required minimum distributions (RMDs) and charitable and family gift giving. There is an even longer and more detailed list of potential deductions and credits that depend on your personal situation which can help decrease your taxes that require additional conversations with your tax advisor.

Many of these topics were covered in a November 2024 tax briefing Astute Wealth Management and Astute CPA presented to clients of the firms. Greg Young of Astute CPA joined me in presiding over the session and offering insight into important potential 2024 year-end tax planning moves. Significantly, these are approaches that can be considered and prospectively taken if they relate to your situation.

Here are several of the top possible moves:

Prepare a year-to-date income and a reasonable projection for your deductions and credits to your tax professional as soon as possible and have a pro-form look created as to where you will land without changes. From here you can work together on efforts to isolate areas where deductions and credits can benefit your tax scenario.
A typical method for lessening the tax bite is decelerating or even deferring the amount of income you take before year end and increasing the amount of deductible expenses/costs/investments. Included in the latter is contributing as much as possible under the laws to Traditional Simple/SEP or Roth IRAs or into a company sponsored qualified retirement plan such as a 401K. Please note the importance of taking your RMD if required to do so as you may be subject to a 25% penalty by failing to comply. You may be advised, as well, by your tax and investment advisor to explore the long-term value of converting a Traditional IRA to a Roth IRA.

There are other valuable adjustments to income which need to be factored into your return whether you file a standard 1040 or opt for the long form. The following chart itemizes such expenses.

Understand the difference between deductions and credits and carefully scrutinize all of your expenses in each area for consideration as a tax benefit. Credits are dollar for dollar reductions of the overall tax amount. Deductions are an offset to income and create a lesser blended tax rate which will reduce your taxes, but much less than on a dollar-for-dollar basis.

The purchase of certain electric vehicles can render tax credits. The installation of certain home energy improvement systems also can generate meaningful credits.

You may consider a deeper conversation with your tax and investment advisor to determine the value of various charitable and personal/family gift giving opportunities which could elicit a tax reduction benefit. Strategies and actions could involve donations to eligible 501c charities, a family foundation, recipient custodial accounts, 529 college savings funds and others.

Businesses operate in many forms, but in their most basic, thorough record keeping could help translate into reduced taxes. Investment property is in itself a type of business and with it comes a more extensive list of record keeping requirements. There are many opportunities within to find tax reducing expenses.

Be apprised that Social Security benefits may be taxed and that reductions to your reductions to your adjusted gross income (AGI) can play an important role in determining your tax outcome. For singles, up to 50% of your Social Security may be taxed when you have an AGI of $25,000 to $34,000. The tax on Social Security hits 85% on AGI over $34,000. On joint returns, Social Security will be taxed up to 50% for AGI between $32,000 and $44,000. At AGI levels more than $44,000 on a joint return, 85% of the Social Security benefit will be taxed. Please contact us as we have created a calculator which can help you work through the tax benefit scenarios depending on your AGI.

This is not meant to be a comprehensive, completely detailed look into every individual or joint tax strategy and planning opportunity. We do strongly recommend you contain your tax and investment advisors make certain you are obtaining the best possible advice heading into the year-end and balance of the tax preparation season.

About the Author: Brady Hopkins

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