Last-Minute Tax Planning: Strategies for Saving Money and Stress

As we find ourselves in the midst of tax season, many of us are gathering our documents and calculating numbers to meet the April 15th deadline. At Tenet Wealth Partners, we understand that tax planning can be a source of stress and confusion for many. However, it might not be too late to implement some savvy strategies that could potentially save you money and reduce your tax burden for 2024. In this article, we’ll explore a variety of last-minute tax planning moves that can benefit both individuals and business owners alike.

Last Minute Opportunities for Tax Year 2024

While it’s always ideal to start tax planning early in the year, we recognize that life often gets in the way. The good news is that there are still several strategies you can employ to optimize your tax situation, even as the deadline approaches. Let’s cover some of the most effective last-minute tax planning moves you can make before April 15th.

1. Maximize Your Retirement Contributions – One of the most powerful tools in your tax-saving arsenal is your ability to contribute to tax-advantaged retirement accounts. For many of these accounts, you have until the tax filing deadline to make contributions that count towards the 2024 tax year. Individual Retirement Accounts (IRAs): For 2024, you can contribute up to $7,000 to a traditional or Roth IRA if you’re under 50, and $8,000 if you’re 50 or older. If you haven’t maxed out your contributions yet, consider doing so before the deadline. Traditional IRA contributions may be tax-deductible, depending on your income and whether you’re covered by a workplace retirement plan. Backdoor Roth IRA: If your income exceeds the limits for direct Roth IRA contributions, you might consider the “backdoor Roth” strategy. This involves making a non-deductible contribution to a traditional IRA and then converting it to a Roth IRA. While this doesn’t provide an immediate tax deduction, it allows your money to grow tax-free in the future. SEP IRAs for Self-Employed Individuals: If you’re self-employed, you have until the tax filing deadline (including extensions) to set up and contribute to a SEP IRA for 2024. You can contribute up to 25% of your net earnings from self-employment, up to a maximum of $69,000 for 2024.
2. Health Savings Account (HSA) Contributions – If you have a high-deductible health plan, don’t overlook the tax advantages of an HSA. For 2024, you can contribute up to $4,150 for individual coverage or $8,300 for family coverage. If you’re 55 or older, you can add an extra $1,000 as a catch-up contribution. HSA contributions are tax-deductible, grow tax-free, and can be withdrawn tax-free for qualified medical expenses.
3. State and Local Tax (SALT) Considerations – Don’t forget about your state and local tax obligations. While the federal SALT deduction is capped at $10,000, some states offer workarounds that allow pass-through entity owners to deduct more of their state taxes on their federal returns. Check if your state offers such a program and if you’re eligible to participate.
4. Review Your Withholdings – If you’ve had any significant life changes in 2024 (marriage, divorce, new job, etc.), make sure your tax withholdings are still appropriate. Adjusting your withholdings now can help you avoid a large tax bill or penalty when you file your return.
5. Consider a Roth Conversion – If you expect to be in a higher tax bracket in the future, converting some of your traditional IRA funds to a Roth IRA could be beneficial. While you’ll pay taxes on the converted amount now, future withdrawals from the Roth IRA will be tax-free. This strategy can be particularly attractive if your income was lower than usual in 2024.
6. Maximize Education-Related Tax Benefits – If you or your dependents are in school, don’t overlook education-related tax benefits: American Opportunity Tax Credit: This credit is worth up to $2,500 per eligible student for the first four years of higher education. Lifetime Learning Credit:  This credit is worth up to $2,000 per tax return and can be claimed for an unlimited number of years.529 Plan Contributions: While contributions to 529 plans aren’t deductible on your federal taxes, many states offer tax benefits for contributions to their state’s plan.
7. Don’t Forget About FSA Funds – If you have a Flexible Spending Account (FSA) through your employer, make sure you’ve used all the funds by the deadline (typically December 31st, but some plans offer a grace period or allow a certain amount to be carried over). FSA funds are use-it-or-lose-it, so don’t let this tax-free benefit go to waste.

Planning for the Future: Looking Ahead to 2025 and Beyond

While these last-minute strategies can help optimize your tax situation for 2024, it’s never too early to start planning for the future. Here are a few considerations to keep in mind:

Potential Tax Law Changes: The Tax Cuts and Jobs Act of 2017 is set to expire after 2025, which could lead to significant changes in tax rates and deductions. Stay informed about potential changes and how they might affect your long-term tax planning strategy.

Retirement Planning: Continue to maximize your contributions to retirement accounts. Consider diversifying your retirement savings between traditional (tax-deferred) and Roth (tax-free growth) accounts to give yourself more flexibility in managing your tax burden in retirement.

Charitable Giving Strategies: Charitable contributions can be an effective way to reduce your taxable income while supporting causes you care about. Here are a few strategies to consider: Bunching Donations: If you’re close to the threshold for itemizing deductions, consider “bunching” two years’ worth of charitable contributions into one year. This could push you over the standard deduction threshold, allowing you to itemize and potentially save more on taxes. Qualified Charitable Distributions (QCDs): If you’re 70½ or older, you can make tax-free donations directly from your IRA to qualified charities. This can satisfy your required minimum distribution (RMD) without increasing your taxable income. Donate Appreciated Securities: Instead of donating cash, consider donating appreciated stocks or mutual funds that you’ve held for more than a year. You’ll avoid paying capital gains tax on the appreciation and can deduct the full fair market value of the securities.

Tax Loss Harvesting: Tax loss harvesting involves selling assets that have declined in value to offset capital gains from other investments. If your capital losses exceed your gains, you can use up to $3,000 of the excess to offset ordinary income.

Estate Planning: Review your estate plan regularly, especially in light of potential changes to estate tax laws. Consider strategies like gifting or establishing trusts to minimize estate taxes for your heirs.

Business Succession Planning: If you’re a business owner, start thinking about your exit strategy. Proper planning can help minimize taxes and ensure a smooth transition when you’re ready to retire or sell your business.

Conclusion: Empowering You to Take Control of Your Taxes

At Tenet Wealth Partners, we view effective tax planning as an integral part of a comprehensive financial strategy. While these last-minute tactics can optimize your 2024 tax situation, we encourage viewing tax planning as an ongoing process.

Key takeaways:

1. Act quickly on available strategies.
2. Consult with tax professionals and financial advisors.
3. Adopt a long-term perspective in tax planning.
4. Stay informed about tax law changes and savings opportunities.
5. Develop a personalized tax strategy aligned with your financial circumstances.

We’re committed to helping you navigate tax complexities and achieve your financial objectives. By staying proactive and working closely with advisors, you can develop a comprehensive strategy that supports your broader financial goals.

Whether you’re an individual, business owner, or somewhere in between, our experienced team at Tenet is here to provide guidance. Don’t let taxes be a source of stress. Take control of your financial future with a year-round approach to tax planning.

Registered Representative of Sanctuary Securities Inc. and Investment Advisor Representative of Sanctuary Advisors, LLC. Securities offered through Sanctuary Securities, Inc., Member FINRA, SIPC. Advisory services offered through Sanctuary Advisors, LLC., a SEC Registered Investment Advisor. Tenet Wealth Partners is a DBA of Sanctuary Securities, Inc. and Sanctuary Advisors, LLC.

The information provided in this communication was sourced by Tenet Wealth Partners through public information and public channels and is in no way proprietary to Tenet Wealth Partners, nor is the information provided Tenet Wealth Partner’s position, recommendation or investment advice.

This material is provided for informational/educational purposes only. This material is not intended to constitute legal, tax, investment or financial advice. Investments are subject to risk, including but not limited to market and interest rate fluctuations.

Any performance data represents past performance which is no guarantee of future results. Prices/yields/figures mentioned herein are as of the date noted unless indicated otherwise. All figures subject to market fluctuation and change. Additional information available upon request.