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Year-End Tax Reminders for 2024

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As we approach the end of 2024, it’s the perfect time to get your financial affairs in order. Year-end tax planning is crucial to maximizing deductions, minimizing liabilities, and avoiding surprises when tax season rolls around. Whether you're a business owner, an individual taxpayer, or someone with complex financial matters, a proactive approach will save you both time and money.

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In this guide, we’ll walk you through essential year-end tax reminders to ensure you’re well-prepared when April 15, 2025, arrives.

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1. Maximize Contributions to Retirement Accounts

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One of the most effective ways to reduce your taxable income is by contributing to retirement accounts. Depending on your situation, these contributions may be tax-deductible, lowering your overall tax liability.

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• 401(k) Contributions: The 401(k) contribution limit for 2024 is $23,000, with an additional catch-up contribution of $7,500 for those aged 50 or older. Ensure you contribute the maximum amount if possible.

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• IRA Contributions: You can contribute up to $7,000 to a traditional or Roth IRA for 2024, with an additional $1,000 catch-up contribution for those 50 and older. Traditional IRA contributions may be tax-deductible depending on your income and filing status.

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✅ Pro Tip: Even though the deadline for IRA contributions extends until the tax filing deadline (April 15, 2025), it's best to maximize contributions by December 31st to align with your overall year-end financial planning.

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2. Review Your Investment Portfolio for Tax-Loss Harvesting

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If you have investments in stocks, bonds, or mutual funds, year-end is a great time to review your portfolio. Tax-loss harvesting allows you to offset gains by selling investments at a loss, reducing your taxable income.

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• Capital Gains and Losses: Capital gains are taxed at 0%, 15%, or 20%, depending on your taxable income. Offsetting gains with losses reduces your taxable income and can lower your capital gains tax rate.

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• Avoid Wash Sales: To take advantage of tax-loss harvesting, be mindful of the "wash sale" rule, which disallows a loss deduction if you repurchase the same or substantially identical security within 30 days before or after the sale.

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✅ Pro Tip: Consult a tax professional before making significant changes to your portfolio to ensure you maximize tax savings without disrupting long-term financial goals.

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3. Consider Charitable Contributions

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If you're feeling generous during the holiday season, charitable contributions can also provide valuable tax deductions.

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• Cash Contributions: Donations made to qualified organizations are deductible up to 60% of your adjusted gross income (AGI). Make sure to keep detailed records of all contributions, including receipts or written acknowledgments from the charity.

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• Non-Cash Contributions: Donating items such as clothing, furniture, or vehicles is also tax-deductible. Be sure to obtain receipts for non-cash donations and file Form 8283 for non-cash contributions exceeding $500.

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• Donor-Advised Funds: If you’re unsure where to donate or want to maximize deductions in one year while giving in future years, a donor-advised fund (DAF) allows you to make charitable contributions, receive an immediate tax deduction, and distribute funds over time.

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✅ Pro Tip: To claim a deduction for 2024, all charitable contributions must be made by December 31st. Make sure to research the organizations to which you are donating to ensure they qualify for tax-deductible donations.

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4. Evaluate Your Health Savings Account (HSA) Contributions

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If you have a high-deductible health plan (HDHP), an HSA is a powerful tool for tax savings. Contributions are tax-deductible, and withdrawals for qualified medical expenses are tax-free.

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• Contribution Limits: The HSA contribution limit for 2024 is $4,150 for individual coverage and $8,350 for family coverage. There’s an additional $1,000 catch-up contribution if you’re 55 or older.

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• Tax Benefits: HSA contributions lower your taxable income, grow tax-deferred, and can be used tax-free for qualified healthcare expenses. After age 65, HSA funds can be used for non-medical expenses without a penalty (though they will be subject to ordinary income tax).

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✅ Pro Tip: While you can make contributions up until the tax filing deadline, contributing before year-end helps ensure you maximize tax savings for 2024.

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Related: Who Qualifies for a HSA Deduction?

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5. Review Required Minimum Distributions (RMDs)

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If you’re 73 or older and have a traditional IRA, 401(k), or another qualified retirement account, the IRS requires you to take required minimum distributions (RMDs) by December 31st to avoid a steep penalty.

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• RMD Penalty: Failing to take your RMD by year-end results in a penalty equal to 25% of the amount that should have been withdrawn (reduced from 50% in previous years due to SECURE Act 2.0).

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• New RMD Age: The SECURE Act 2.0 increased the starting age for RMDs from 72 to 73, so if you turned 73 in 2024, this will be your first year required to take an RMD.

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✅ Pro Tip: Consider using your RMD to make a qualified charitable distribution (QCD). QCDs allow individuals aged 70½ or older to donate up to $100,000 directly from their IRA to a qualified charity, which counts toward their RMD without increasing taxable income.

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6. Check Eligibility for Energy Credits

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If you've made energy-efficient improvements to your home or purchased an electric vehicle (EV), you may be eligible for tax credits under the Inflation Reduction Act of 2022.

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• ‍Energy-Efficient Home Improvement Credit: You can claim up to 30% of the cost of eligible home improvements like solar panels, heat pumps, or energy-efficient windows. This credit is capped at $1,200 annually, except for solar, which has no limit.

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• ‍Clean Vehicle Credit: If you purchased a new EV in 2024, you may be eligible for a federal tax credit of up to $7,500, depending on the vehicle’s battery capacity and other factors.

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✅ Pro Tip: Keep all receipts and documentation for energy-efficient purchases, and consult a tax professional to ensure you claim all eligible credits.

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7. Defer Income and Accelerate Deductions

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For individuals who expect to be in a lower tax bracket next year, deferring income or accelerating deductions can help minimize your 2024 tax bill.

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• Defer Income: If possible, defer income such as year-end bonuses, freelance earnings, or self-employment income to 2025 to reduce taxable income for 2024.

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• Accelerate Deductions: Pay deductible expenses like property taxes, mortgage interest, or medical bills before December 31st to claim them on your 2024 return.

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✅ Pro Tip: Be cautious when deferring income or accelerating deductions, as this can sometimes trigger the alternative minimum tax (AMT). A tax advisor can help you weigh the benefits of these strategies based on your overall financial situation.

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8. Assess Your Withholding and Estimated Payments

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If you’re self-employed or have income not subject to withholding, ensure you've made sufficient estimated tax payments throughout the year. Missing quarterly payments or having insufficient withholding can lead to penalties and interest.

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• Safe Harbor Rule: To avoid penalties, ensure your total payments (withholding + estimated taxes) are at least 90% of your current-year tax liability or 100% of your prior year’s tax liability (110% for higher earners).

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• Adjust Withholding: If you received a significant windfall in 2024, consider adjusting your withholding on your W-4 to avoid owing a large balance when you file.

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✅ Pro Tip: The fourth-quarter estimated tax payment is due January 15, 2025. However, making this payment by December 31st allows you to claim the deduction in 2024.

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9. Utilize the Gift Tax Exclusion

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The annual gift tax exclusion for 2024 is $18,000 per recipient, meaning you can give up to this amount to as many people as you want without incurring gift taxes.

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• Superfund 529 Plans: If you’re funding a child or grandchild’s education, consider making a lump-sum contribution to a 529 college savings plan. You can contribute up to five years’ worth of gift tax exclusions at once ($85,000 per beneficiary in 2024) without triggering gift taxes.

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✅ Pro Tip: Gifts above the annual exclusion count against your lifetime estate and gift tax exemption, which is $12.92 million per individual in 2024.

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10. Keep an Eye on Legislative Changes

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Tax laws are constantly evolving, and 2024 is no different. Stay informed about potential changes that could impact your tax strategy, such as new tax brackets, modifications to deductions, or updates to credits.

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• Tax Legislation: Keep an eye on proposed legislation, especially concerning income tax rates, capital gains, and estate tax limits, as these changes may influence year-end decisions.

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• Expiration of Temporary Provisions: Certain pandemic-era tax provisions, such as enhanced child tax credits or flexible employee retention credits, may expire or be altered, so it’s essential to know what will be available for your 2024 filing.

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✅ Pro Tip: Working with a tax professional will help you stay ahead of any changes and ensure that your tax strategies are up to date.

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Final Thoughts

Preparing for tax season doesn't have to be stressful. By staying organized, taking advantage of year-end tax-saving opportunities, and consulting with a tax professional, you can minimize your tax liability and start 2025 on the right foot. Don’t wait until the last minute—start planning today!

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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.