Contributed by Elizabeth Shauger, director with Mauldin & Jenkins
As 2024 comes to an end, many of us will reflect on the blessings and challenges this year has brought. It is also important to look at your finances at this time of year and get ahead with your tax planning. Doing it now means you won’t get caught off guard, come April 15 and gives you time to minimize unpleasant surprises. Several deductions may still be available to help you lower your tax bill, depending on your tax situation. Here are a few options to think about:
HSA
A Health Savings Account (HSA) is a tax-advantaged savings account that allows you to set aside money to pay for qualified medical expenses. If your insurance policy qualifies you to have an HSA, you can contribute up to an annual maximum amount set by the IRS. Due to high inflation, the contribution limits for 2024 have increased considerably — this year you can save up to $4,150 for self-only coverage, or up to $8,300 if you have family coverage. Participants 55 and older can contribute an extra $1,000 to an HSA. Make contributions by April 15, 2025, to deduct them from your 2024 tax return.
SEP IRA Contributions
Another great way to reduce your tax bill is by funding your retirement account. Self-employed individuals can contribute up to 25% of their net earnings from self-employment, capped at $69,000 for 2024. You will need to fund the SEP IRA plan by the due date of your income tax return (including extensions).
Charitable Donations
With proper tax planning strategies, you can maximize the tax benefit of your generosity as you make year-end gifts to qualified charitable organizations you hold dear to your heart.
- Converting a traditional IRA to a Roth IRA typically means paying significant taxes, but making a charitable contribution can help offset that additional taxable income.
- If your income is particularly high this year — perhaps you have sold a business, gotten an inheritance or received a large year-end bonus — consider “bunching” multiple years’ worth of charitable giving in one year to bring down the taxable income.
- Instead of writing checks, review your portfolio to donate long-term holdings such as stocks, mutual funds, bonds, etc. You won’t pay capital gains taxes when you contribute these highly appreciated assets directly to a charity.
Casualty Losses
Although the TCJA suspended the personal casualty and theft loss deduction through 2025, there’s an exception for losses attributable to a federally declared disaster. A tax deduction can help ease the devastation for those in Florida and other states who lost so much during this year’s destructive hurricane season.
Per the regulation, personal casualty and theft losses are subject to reductions of $100 per casualty and 10% of your adjusted gross income (AGI) — unless, that is, the loss is attributable to a federally declared disaster. Personal casualty and theft losses attributable to a qualified disaster loss are not subject to the 10% of AGI reduction and the $100 reduction is increased to $500. There is an exception to the exception rule though: If you have personal casualty gains for the tax year, standard limits to the personal casualty and theft loss deduction will apply to losses due to a federally declared disaster.
IRA Credits and Deductions
Feel like saving money at the same time you’re helping the environment? The Inflation Reduction Act (IRA) of 2022 offers substantial tax incentives for making energy-efficient changes. This sweeping legislation includes tax credits of up to $7,500 for buying an electric car or truck, which helps reduce air pollution caused by gasoline engines.
Many different kinds of home improvements also qualify for generous tax credits and deductions. You can qualify to claim IRA tax incentives by installing solar panels or wind energy equipment, insulating your attic, adding energy-efficient windows and doors, replacing a gas stove with an induction range, replacing your old gas-powered furnace with a heat pump and much more. The IRA even gives you a tax credit to defray the cost of upgrading your home’s circuit breaker box, if it is needed for the other energy-efficient improvements you are making.
Plan Ahead to Save at Tax Time
Now is the time to be proactive. Paying attention to taxes before the year ends allows you to explore potential savings opportunities and take steps to reduce your 2024 tax liability. Be sure to talk with your advisor or reach out to Mauldin & Jenkins for knowledgeable guidance.
Elizabeth Shauger, CPA is a Director with Mauldin & Jenkins in the Bradenton, Florida office. Elizabeth has over 15 years of tax experience in public accounting servicing a wide range of industries. She specializes in corporate, partnership and high-net-worth individuals, as well as tax planning. Elizabeth received her Bachelor of Business Administration in Accountancy, from Florida International University, in 2005, and her Master in Taxation, from Nova Southeastern University, in 2007. She is a member of the American Institute of Certified Public Accountants (AICPA) and the Florida Institute of Certified Public Accountants (FICPA). Elizabeth and her husband reside in Tampa, Florida with their two sons, William and Matthew.