According to financial gurus, there is still time to reduce your 2024 tax burden or increase your refund as year-end draws near.
In most cases, if you overpay taxes over the year, you will receive a refund. If you haven’t paid enough, you receive a tax bill.
There isn’t much time for last-minute changes because the majority of 2024 tax strategies must be finished by December 31.
Many investors will not have the opportunity to turn portfolio losses into tax benefits after a successful year for the stock market.
Additionally, increasing pretax 401(k) employee deferrals for 2024 may be too late, lowering your adjusted gross income.
Financial gurus say that certain important methods are still available.
Leverage tax-free ‘compound interest’
According to experts, if you have a high-deductible health plan, you can transfer funds to a health savings account, or HSA, which provides several advantages, including an upfront tax reduction.
The 2024 HSA contribution cap is $8,300 for family plans and $4,150 for self-only coverage. You can withdraw the funds tax-free for approved medical expenditures, and the invested balance grows tax-free from federal taxes.
Although you have until the tax deadline to make 2024 HSA installments, you will have more time in the market if you start investing the remaining amount sooner. According to Tommy Lucas, an enrolled agent and certified financial planner with Moisand Fitzgerald Tamayo in Orlando, Florida, you don’t need to wait.
“Invest it and let compound interest do the heavy lifting,” he said.
Additionally, you have until the 2024 pretax individual retirement account contribution deadline. However, the deduction is dependent on your income, filing status, and employment retirement plan, so it’s best to wait until you’ve calculated your 2024 tax forecasts, Lucas advised.
Give away lucrative assets to avoid paying double taxes.
Either the basic deduction or the total itemized deduction, whichever is higher, is taken when you file your taxes. You can receive a tax credit for charitable contributions if you plan to itemize for 2024.
Gifting profitable assetsoffers a double tax advantage, because you get a tax break and bypasscapital gains taxes, said certified financial planner Rick Nott, managing director at Angeles Wealth Management in Santa Monica, California.
With unprecedented gains for digital assets like bitcoin over the past year, investors in cryptocurrencies are becoming more interested in the approach.
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As long as you’ve owned the investment for more than a year, you can usually deduct its market value. Public charities are eligible for a deduction up to 30% of adjusted gross income.
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