Check out a video on Tax Planning Tips Here!
One of the most important conversations you can have with your tax professional and Financial advisor is how you can properly tax plan each year to get results that benefit you. In working with clients and their accountants over the years, we’ve seen how proper tax planning can make some pretty significant differences to one’s pocket each year.
For that reason, today, we wanted to walk through five tax planning strategies that you could potentially utilize before 2024 comes to an end.
- Maximize Your Retirement Plan Contributions
If your employer offers a 401(k), 403(b), or 457 plan, think about potentially adding more to it if you haven’t hit the maximum limit for the year. The maximum contribution limit for 2024 is $23,000, and if you’re over 50, you can contribute an additional $7,500 through a catch-up provision.
If you don’t have access to an employer-sponsored plan, consider contributing to an Individual Retirement Account (IRA). For 2024, the IRA contribution limit is $7,000, with an extra $1,000 catch-up contribution for those over 50.
If your account is “traditional” in any of the above, your contributions will go in tax-deferred and they can help lower your taxable annual income for that year. For Roth accounts, your contributions go in post-tax so you will not be able to deduct them from your income for the year.
- Tax Loss Harvesting
Tax loss harvesting is a strategy that involves selling assets that are currently at a loss to offset capital gains or even a portion of your income for the year. This can be a valuable tool, especially if you have investments that haven’t performed as well as expected.
- Giving Back Through Charitable Donations
Charitable giving is not only a great way to give back, but it can also reduce your tax burden. Consider donating highly appreciated assets, such as stocks, to lower your cost basis while supporting a cause that means something to you. You can also contribute to a donor-advised fund (DAF) for an immediate tax deduction, with the flexibility to donate to charities later.
Additionally, if you are required to take required minimum distributions (RMDs) from your retirement accounts, you can make a qualified charitable distribution (QCD) of up to $100,000, which can also help bring down your taxable income.
- Plan Your Estate Strategically
Estate planning plays a key role in potentially minimizing taxes for your heirs. Two key strategies that may be worth considering: gifting below the annual gift tax exclusion and establishing a trust. Gifting allows you to gradually reduce the size of your taxable estate, while moving assets into a trust can shield them from estate taxes upon your passing.
- Regularly Review Your Withholdings
It’s important to periodically review your tax withholdings, especially if you have multiple jobs or sources of income. Consulting with your accountant can help ensure that you’re withholding the correct amount to avoid any surprises when tax season rolls around.
The Final Word:
There are a number of different tax planning strategies that one may be able to take advantage of with the proper advice. We strongly advise that you work with your tax and financial professional and ensure they are on the same page when considering any tax planning tips.
If you found these tax planning tips helpful, we’d love to further the conversation with you. Feel free to visit us at www.rocklinewealth.com for more insights on tax planning, retirement strategies, and how we can help you reach your financial goals.
Disclosures:
Rockline Wealth Management (RWM) is a registered investment adviser located in Plainview, NY. RWM is registered with the U.S. Securities and Exchange Commission. Registration of an investment adviser does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the Commission.
Rockline Wealth Management does not offer tax services. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation.
All investment strategies have the potential for profit or loss. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment or strategy will be suitable or profitable for a client's investment portfolio. Asset allocation and diversification do not ensure or guarantee better performance and cannot eliminate the risk of investment losses.
Real-life examples given in this video should not be viewed as guaranteed outcomes when investing. Past performance is not indicative of future results and every individual’s investment circumstances are different. Individuals should consult their financial professional before implementing their investment plan.