You might be drinking egg nog now and curling up by the fire, but before you know it tax time will be upon us. The end of the year is an excellent time to examine your taxes in preparation for filing your 2024 tax return, especially if you expect your financial situation to change significantly in 2025. A few tax strategies can reduce your tax burden and help you get a bigger tax refund, but you’ll need to act soon, as some steps require preparation to complete before Dec. 31, 2024.
It’s worth taking the time now to review your tax situation, as a little effort now could pay off big later. Read on to find end-of-the-year tax tips to set you up for the upcoming tax season. The US has a “pay as you go” model of income tax, which is why your employer withholds money from your paycheck and freelancers have to pay estimated taxes quarterly. Failure to pay enough taxes during the year can result in a penalty at tax time.
Your employer determines the amount withheld from your paycheck by your W-4 tax form, which includes your filing status and estimated tax deductions. The end of the year is a great time to review your W-4 and current withholding to decide if you want to change it. The IRS’ Tax Withholding Estimator tool lets you estimate your current withholding and projected tax refund to adjust your W-4 form. You can submit an updated W-4 form to your company at any time, and your employer must institute your changes by the start of the first payroll period, which is 30 days or longer after your W-4 submission.
One bright spot of potential stock losses is the opportunity to practice “tax loss harvesting.” This tax strategy works by realizing losses or selling your stocks and assets that have lost value, to offset other capital gains you may have earned. For example, if you made $25,000 in profit on a real-estate sale in 2024 but lost big on an investment in a struggling stock (like Intel), you can sell your securities and subtract the financial loss of that investment from your capital gains. If you have $25,000 in stock losses, you’ll offset the $25,000 you earned from the real-estate sale to eliminate that tax burden.
Retirement funds like 401(k) accounts and IRAs provide one of the most productive tax deductions because you can reduce your tax bill while building a nest egg for the future. If you can afford it, max out your possible contributions to any retirement account before the end of the year. The deduction limit for 401(k) contributions for 2024 taxes is $23,000, and that does not count employer contributions. A worker in the 24% tax bracket could knock almost $5,000 off their tax bill just by saving money for the future. Crank up the percentage of your regular 401(k) contribution for the last pay period of 2024 to make the most of your potential retirement deductions.
Thanks to the Inflation Reduction Act of 2022, there are major incentives to make your home “greener” in 2024. The law boosted the amount of tax credits you can get for increasing your home’s energy efficiency. For this tax year, the residential clean energy credit — which gives money back for installing solar panels, geothermal heat pumps, fuel cells and battery storage — is still at 30%. Tax credits have more of an impact on your tax bill than deductions. Deductions lower your level of taxable income, tax credits directly reduce the amount of taxes that you owe to the IRS.
Medical expenses can be a significant deduction for many taxpayers, but the IRS only allows you to deduct expenses that are in excess of 7.5% of your AGI. For example, if your AGI is $50,000, and you spent $5,000 on medical expenses, you can deduct $1,250 ($5,000 – ($50,000 x 7.5%)) from your taxable income. For that reason, it can be advantageous to group all of your major medical expenses into one year. These expenses can include surgeries, preventative care, hospital visits, dental care, prescription medicine, glasses, hearing aids and mental health care like therapy, as well as transportation costs to and from providers.
If you’re self-employed or a freelancer, deducting your business expenses can save you considerable money on taxes. Depending on how much you’ve already spent on your professional work this year, you might consider prepaying for next year’s expenses before the end of 2024 to reduce your tax burden. It’s very important to note that everyone’s tax situation is different. These end-of-year tax tips may be effective for you, but there is no “one size fits all” approach to tax preparation. Be sure to consult a tax professional before making any major tax decisions. For more on the 2024 tax season, see how much income brackets and the standard deduction are changing in 2025.
- O fim do ano é o momento ideal para revisar os impostos e preparar a declaração de imposto de renda de 2024.
- O ajuste da retenção na fonte e das deduções fiscais, assim como o aproveitamento de créditos fiscais, podem ajudar a reduzir a carga tributária e obter um reembolso maior de impostos.
- Estratégias como “colheita de perdas fiscais”, maximização das contribuições para aposentadoria e investimentos em eficiência energética podem beneficiar sua situação fiscal.