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Maximize Your Savings: Tips for Early Tax Planning

It’s never too early to start thinking about your taxes. In fact, staying ahead of the game throughout the year can significantly reduce your tax bill come filing season. If you’re aiming to keep your taxes as low as possible for your 2024 return, here are some proactive steps you can take right now:

1. Review Your Paycheck Withholdings First things first, check your tax withholdings to ensure you’re not paying more or less than necessary. The IRS provides an online tool to help you calculate whether your current withholdings align with your eventual tax bill. If adjustments are needed, fill out a new Form W-4 and submit it to your employer.

2. Defer Earnings Consider deferring some of your 2024 income to a future year by contributing to retirement accounts. For 2024, the contribution limits are $23,000 for 401(k)s ($30,500 if you’re 50 or older), $7,000 for both traditional and Roth IRAs ($8,000 if 50 and older), or $16,000 for a SIMPLE IRA ($19,500 if 50 and older). Setting up automatic transfers from your paycheck or checking account to your retirement fund can streamline this process.

3. Plan Tax-Efficient Withdrawals If you have various retirement accounts, strategize your withdrawals to minimize taxes. You might prioritize withdrawing from taxable accounts first and leave Roth account withdrawals for later. Alternatively, you could opt for proportional withdrawals from all retirement accounts for a more predictable tax bill each year.

4. Offset Capital Gains with Losses Explore the option of tax-loss harvesting if you’re contemplating selling appreciated investments. Look into your portfolio for underperforming assets that you could sell for a loss to offset gains. Consulting with your investment advisor can help you navigate this strategy effectively.

Early tax planning can translate into significant savings when it comes time to file your return. Don’t hesitate to reach out if you have questions about your tax situation for 2024. Taking proactive steps now can pave the way for a smoother and more tax-efficient financial future.