Top Mid-Year 2024 Tax-Saving Moves for Individuals

Maximize Retirement Contributions

• 401(k) and IRA Contributions: Ensure you’re contributing the maximum allowed to your retirement accounts. For 2024, you can contribute up to $23,000 to a 401(k) plan, with an additional $7,500 catch-up contribution if you’re 50 or older. For IRAs, the limit is $7,000, with a $1,000 catch-up contribution.
• Roth IRA Conversions: Consider converting traditional IRA funds to a Roth IRA. While you’ll pay taxes on the converted amount, future withdrawals will be tax-free.

Take Advantage of Tax Credits

• Energy-Efficient Home Improvements: If you’ve made energy-efficient upgrades to your home, such as installing solar panels or energy-efficient windows, you may qualify for tax credits.
• Education Credits: If you’re paying for higher education expenses, look into the American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit (LLC).

Utilize Health Savings Accounts (HSAs)

• Contributions: HSAs offer triple tax benefits: contributions are tax-deductible, earnings grow tax-free, and withdrawals for qualified medical expenses are tax-free. For 2024, the contribution limits are $4,150 for individuals and $8,300 for families with $1,000 more in catch-up contributions for those 55 and over. Caution, HSA participation is not allowed if enrolled in Medicare.

Tax-Loss Harvesting

• Offset Gains: If you have investments in taxable accounts, consider selling underperforming assets to offset capital gains. This strategy can help reduce your overall tax liability.

Review and Adjust Withholdings

• W-4 Adjustments: Mid-year is a good time to review your tax withholdings. Adjusting your W-4 can help ensure you’re not overpaying or underpaying taxes throughout the year.

Charitable Contributions

• Donor-Advised Funds (DAFs): Contributing to a DAF allows you to take an immediate tax deduction while distributing funds to charities over time. This can be particularly beneficial if you have a high-income year.

Estate Planning

• Gifting: Consider making use of the annual gift tax exclusion, which allows you to gift up to $18,000 per recipient without incurring gift taxes.
• Review Estate Plans: Ensure your estate plan is up to date, taking into account any changes in tax laws or personal circumstances. Time is running out on the 2017 Tax Cuts and Jobs Act (TCJA), with estate planning provisions scheduled to sunset at the end of 2025. That means the estate and gift tax exclusion, which was doubled, could revert to its pre-2017 level.

Tax-Deferred Accounts

• 529 Plans: Contributions to 529 college savings plans grow tax-free, and withdrawals for qualified education expenses are tax-free. While aggregate contribution limits to 529s are governed by state tax laws and are usually quite high, individuals may contribute up to $18,000 ($36,000 per married couple filing jointly) to any number of recipients in 2024, likely without it being considered a taxable gift. Some states offer tax deductions or credits for contributions to these plans.

Capital Gains, Losses and Dividends

• Realize Gains: With potential changes to capital gains tax rates in the future, consider realizing gains now if you expect higher rates later.
• Offset Gains: If you have investments in taxable accounts, consider selling underperforming assets to offset capital gains. This strategy can help reduce your overall tax liability.
• Qualified Dividends: Ensure your investments are structured to take advantage of the lower tax rates on qualified dividends.

Review Tax Law Changes

• Stay Informed: Keep up with any changes in tax laws that may affect your situation. The SECURE 2.0 Act, for example, has introduced new provisions for retirement savings and RMDs.

By taking these steps, you can optimize your tax situation and potentially save money. If you have any questions or need personalized advice, please contact our office. We’re here to help you navigate the complexities of tax planning