As we inch closer to the end of the year, it’s still possible to either cut your 2024 tax bill or set yourself up for a higher refund, according to financial experts.
Generally speaking, a tax refund rolls in when you’ve paid more taxes than necessary over the year, while a tax bill means you haven’t quite paid enough. To take advantage of most 2024 tax strategies, you’ll need to act by December 31, leaving just a little time for any last-minute adjustments.
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With the stock market having generally performed well this year, many investors might find fewer opportunities for tax-loss harvesting, which typically turns portfolio losses into potential tax deductions.
It’s also nearing too late in the year to jack up your pretax 401(k) contributions for 2024, which otherwise could have helped lower your adjusted gross income.
However, some crucial strategies are still worth considering, financial advisors suggest.
Maximize Tax-Free ‘Compound Interest’
For those with a high-deductible health plan, channeling funds into a Health Savings Account (HSA) could be beneficial. An HSA offers an initial tax deduction along with additional perks, according to experts.
In 2024, you can contribute up to $4,150 for individual plans and $8,300 for family coverage. The invested funds enjoy tax-free growth and can be tapped tax-free for eligible medical expenses.
While you have until the tax filing deadline to make your 2024 HSA contributions, investing these funds sooner allows them more time in the market. "There’s no need to delay," advises Tommy Lucas, a certified financial planner and enrolled agent at Moisand Fitzgerald Tamayo in Orlando, Florida. "Get it invested and let compound interest do its magic," he emphasizes.
Similarly, you have until the tax deadline for 2024 pretax contributions to an individual retirement account. However, the deduction hinges on factors like your filing status, income, and any retirement plan at work. It’s wiser to wait until you’ve run through your tax projections for 2024, Lucas suggests.
Give Winning Assets to Charity for a ‘Double Tax Advantage’
When filing taxes, you can opt for either the standard or itemized deductions, whichever benefits you more. If you anticipate itemizing for 2024, charitable contributions could offer you a tax advantage.
Donating profitable assets can offer a "double tax advantage," as you not only receive a tax deduction but also avoid capital gains taxes, explains Rick Nott, a certified financial planner and managing director at Angeles Wealth Management in Santa Monica, California.
There’s a rising interest among cryptocurrency investors in this strategy, especially following substantial gains from digital assets like bitcoin over the past year.
Typically, you can deduct the full market value of an asset, provided you’ve held it for over a year, with a deduction cap of 30% of your adjusted gross income when donating to public charities.
