12 Tax Tips to Help Lower Your 2024 Tax Bill Before Year-End

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12 Tax Tips to Help Lower Your 2024 Tax Bill Before Year-End

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As the end of the year approaches, it’s important to make strategic decisions that could reduce your tax bill and set you up for success in 2025 and beyond. Tax rates are set to increase for some taxpayers after 2025 unless Congress extends provisions from the Tax Cuts and Jobs Act (TCJA), so now is the time to take advantage of every possible tax break. Below, we’ve outlined twelve tax-saving strategies to consider before the year ends to help minimize your tax liability for 2024.

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1. Contribute to Tax-Advantaged Accounts

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One of the most effective ways to reduce your taxable income is by contributing 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, there are deadlines for other retirement plans that fall on December 31, 2024.

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• 401(k) or 403(b) Contributions: You can contribute up to $23,000 in total combined traditional and Roth contributions to your workplace retirement plan. If you’re 50 or older, you can also make additional catch-up contributions of $7,500. Traditional contributions will reduce your taxable income on a dollar-for-dollar basis, which could significantly lower your 2024 tax bill.

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• Health Savings Accounts (HSAs): If you’re enrolled in a high-deductible health plan (HDHP), you can make tax-deductible contributions to an HSA. For 2024, you can contribute up to $4,150 for self-only coverage and $8,300 for family coverage. Contributions to HSAs reduce your taxable income, and distributions used for qualified medical expenses are tax-free. Any unused funds can be rolled over to future years and used for future medical expenses.

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Note: Contributions made outside of payroll are eligible until the tax filing deadline, but you won’t receive the same tax benefits as payroll deductions.

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2. Turn Investment Losses Into Tax Gains

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If you’ve experienced losses in your investments this year, consider using tax-loss harvesting to offset your capital gains. This strategy involves selling investments that have decreased in value, replacing them with similar investments, and using the loss to offset gains you’ve realized elsewhere.

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• Offset Future Income: If your capital losses exceed your capital gains, you can use up to $3,000 ($1,500 if married filing separately) of the remaining losses to offset your ordinary income, such as wages. Unused losses can be carried forward to offset future gains or income.

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• Cryptocurrency Exceptions: The IRS wash sale rules don’t apply to cryptocurrency, allowing you to sell coins at a loss and buy them back immediately without losing the tax break.

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3. Consider a Roth Conversion

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A Roth conversion involves transferring assets from a traditional IRA or workplace retirement account to a Roth IRA. While you’ll pay taxes on the converted amount, future withdrawals from the Roth IRA are tax-free, and there are no required minimum distributions (RMDs) during your lifetime.

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• Why Convert Now? Tax rates are set to increase in 2026 when provisions of the Tax Cuts and Jobs Act are scheduled to expire. Converting funds to a Roth IRA now allows you to pay taxes at current rates, which may be lower than they would be in the future. Additionally, you may not be required to take RMDs from Roth IRAs, allowing your investments to grow tax-free for longer.

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4. Consider Itemizing Deductions

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Itemizing deductions can help reduce your taxable income if they exceed the standard deduction. For 2024, the standard deduction is $29,200 for married couples and $14,600 for single filers. Common itemizable deductions include:

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• Medical Expenses: You can deduct medical expenses that exceed 7.5% of your adjusted gross income (AGI). If you’re close to this threshold, consider paying medical expenses before year-end to maximize your deduction.

• Home Mortgage Interest: Interest on your primary mortgage or a second home mortgage is typically deductible.

• State and Local Taxes (SALT): You can deduct state and local income taxes or property taxes, but the SALT deduction is capped at $10,000.

• Charitable Contributions: If you plan to donate, it may be beneficial to do so before the end of the year to increase your itemized deductions.

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5. Trim College Costs with Education Tax Breaks

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The American Opportunity Tax Credit (AOTC) offers a dollar-for-dollar credit on qualified education expenses for the first four years of higher education, up to $2,500 per student. To maximize this credit, consider prepaying tuition for the first semester of 2025 before year-end.

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• 529 College Savings Plans: If you contribute to a 529 plan, you may qualify for state tax deductions, depending on your state’s tax laws. While there are contribution limits, you can gift up to $18,000 per year (or $36,000 for married couples) to a 529 plan without triggering the federal gift tax.

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6. Defer Income to 2025

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If you have freelance income or other gig work that is billed at the end of the year, consider delaying those payments until January 2025 to push the income into the next tax year. Doing so can help reduce your taxable income for 2024. However, be sure to consult with a tax professional to determine whether this strategy is appropriate for your situation.

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7. Bunch Charitable Contributions

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Bunching involves making multiple years’ worth of charitable contributions in a single tax year. This strategy allows you to exceed the standard deduction threshold and potentially qualify for itemizing deductions.

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• Donor-Advised Funds (DAFs): If you’re planning to donate over several years, you can make a lump-sum contribution to a donor-advised fund this year and spread out the giving over multiple years. The benefit is that you receive the full charitable deduction upfront.

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8. Donate Appreciated Assets

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If you hold appreciated assets like stocks or mutual funds, consider donating them to a qualified charity. By doing so, you can avoid paying capital gains taxes on the appreciation and potentially deduct the fair market value of the asset.

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• AGI Limits: Donations of appreciated assets are subject to a 30% AGI limit, but you can carry forward any unused portion for up to five years.

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9. Don't Forget About Cash and Property Donations

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In addition to appreciated assets, you can donate cash and property, such as household goods or real estate, to qualify for deductions. Cash donations are deductible up to 60% of your AGI.

• Document Your Donations: The IRS requires documentation for charitable donations, especially for larger gifts, so be sure to keep receipts and records.

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10. Consider Gifting to Loved Ones

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You can give up to $18,000 per recipient annually without triggering the federal gift tax. This amount will increase to $19,000 in 2025. If you have multiple children or other loved ones, this strategy can help reduce your taxable estate without affecting your lifetime gift and estate tax exemption.

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Estate Planning: Making gifts to family members can help reduce the size of your taxable estate and avoid potential estate taxes in the future.

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11. Don't Forget RMDs (Required Minimum Distributions)

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If you’re 73 or older, you must take a Required Minimum Distribution (RMD) from your traditional IRA, 401(k), or other retirement accounts. The deadline to take your RMD is December 31, 2024, and failing to do so can result in a penalty of up to 25% of the amount you were required to withdraw.

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• First RMD: If 2024 is your first year to take an RMD, you have until April 1, 2025, to take it. However, taking two RMDs in one year (if you delay your first RMD until 2025) could increase your taxable income for that year.

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12. Consider a Qualified Charitable Distribution (QCD)

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If you're 70½ or older, you can make a Qualified Charitable Distribution (QCD) from your IRA. Up to $105,000 can be donated directly to charity from your IRA, and it will count toward your RMD for the year. The benefit is that the distribution is not taxable, and it doesn’t need to be claimed as income.

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• Age Requirement: You can begin making QCDs at age 70½, which is earlier than the age for regular RMDs (73).

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Looking Ahead to 2025

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While tax laws are always subject to change, it’s important to consider how potential tax rate increases in 2026 could affect your financial situation. As you implement these strategies before the end of the year, keep in mind that planning for the future, including the possibility of higher tax brackets, is key to minimizing your tax burden.

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‍Consult with a tax professional to ensure that you’re making the most of the opportunities available to you. By proactively managing your tax strategy now, you can minimize your tax liability for 2024 and set yourself up for financial success in 2025 and beyond.

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Final Thoughts

Taking these steps before 2024 ends can significantly enhance your retirement savings and reduce stress during tax season. By maximizing contributions, staying compliant with RMDs, and leveraging tax-saving strategies, you’ll be well-positioned for a secure financial future. Start planning today and consult with professionals to make the most of your retirement accounts.

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I hope this information was helpful! If you have any questions, feel free to reach out to us here. I’d be happy to chat with you. 

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Vincere Tax can help you with the tax implications of business taxes, stocks, bonds, ETFs, cryptocurrency, rental property income, and other investments. 

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Being audited is comparable to being struck by lightning. You don't want to practice pole vaulting in a thunderstorm just because it's unlikely. Making sure your books are accurate and your taxes are filed on time is one of the best ways to keep your head down during tax season. Check out Vincere's take on tax season!

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This post is just for informational purposes and is not meant to be legal, business, or tax advice. Regarding the matters discussed in this post, each individual should consult his or her own attorney, business advisor, or tax advisor. Vincere accepts no responsibility for actions taken in reliance on the information contained in this document.