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Year-End Tax Savings Checklist: Great Tax Moves You Can Still Make

• Dec 18, 2024 wisecpa

Conducting a year-end tax review of your financial situation can uncover opportunities to cut your tax bill or save you from an unpleasant tax surprise. But hurry, the clock is ticking! Here are several areas to consider reviewing in the next few weeks to trim your tax bill. These tips are particularly helpful for small business owners who use accounting services for small business to keep their finances on track.

Review #1: Retirement Savings Accounts

The deadline to contribute to a 401(k) plan to help reduce your 2024 taxable income is December 31st. If your employer’s plan allows it, consider making a last-minute lump sum contribution. For 2024, you can contribute up to $23,000 to a 401(k), plus another $7,500 if you’re age 50 or older.

Even better, you have until April 15, 2025, to contribute up to $7,000 into a traditional IRA, plus another $1,000 if you’re age 50 or older. And as long as your income does not exceed phaseout limits, your traditional IRA contribution can reduce your taxable income on your 2024 tax return.

Review #2: Investments

If you own stock outside a tax-deferred retirement plan, consider selling under-performing stocks by December 31st to offset taxable capital gains. If your net capital losses exceed your gains, you can net up to $3,000 against other income, such as wages. Losses exceeding $3,000 can be carried forward into future years.

Small businesses can also benefit from consulting small business accounting services to strategically manage investment gains and losses while ensuring compliance with tax regulations.

Review #3: Appreciated Assets

Selling appreciated assets at the right time can significantly impact your tax situation. Estimate your current taxable income and compare it to next year’s projected taxable income to determine the most advantageous year for the sale. Don’t forget to account for the 3.8% net investment income tax where applicable.

For those managing a small business, collaborating with the best accounting services for small business can simplify these calculations and help maximize tax efficiency.

Review #4: Tax-Efficient Contributions

If you’re reviewing appreciated assets, consider donating one or more of these assets to charity. This strategy can help you pass the itemized deduction threshold and avoid capital gains taxes while receiving a market value charitable deduction.

If you’re over 70 ½, you can also make up to $100,000 in direct contributions from a qualified IRA account without paying taxes on the withdrawal.

Review #5: Health Spending Accounts

If you participate in a Health Savings Account (HSA), maximize your annual contribution to reduce taxable income. Contributions allow you to pay for qualified health expenses with pre-tax dollars. For the 2024 tax year, the maximum contribution is $4,150 if single and $8,300 for married couples, with an additional $1,000 allowed if you’re age 55 or older. Contributions are due by April 15, 2025.

For Flexible Savings Accounts (FSAs), check your plan’s carry-forward rules. Many plans allow you to carry forward up to $640 from 2024 into 2025.

Partner With a Small Business Accountant Near You

Whether you’re preparing for tax season or seeking ways to optimize your financial strategy, partnering with a small business accountant near me can help you make the most of these tips. The right accountant will ensure that your year-end tax planning aligns with your business goals and personal financial needs.

By leveraging accounting services for small business, you can uncover hidden savings opportunities, streamline your tax filing process, and reduce financial stress. Start reviewing your financial situation today, and make the most of these year-end strategies!