It is that time of year…AGAIN! Tax filings are due and most people wait far too long to get ready. Here is a quick check list of things to start thinking about now. You and your accountant will be happy you started early!
- Gather inventory of all your tax-related documents
When it comes to tax preparation, much of the work is locating the records you’ll need to reference when you file. To help the filing process go more smoothly, consider organizing these papers in advance, even as you receive them, preferably in a central location.
The IRS generally requires many tax documents, such as W-2 forms and 1099 forms, to be delivered to taxpayers by Jan. 31 (or Feb. 15 for securities accounts) via mail or electronic means. If you’re itemizing deductions, you’ll also want to track down your personal receipts for deductible expenses ahead of time, such as charitable contributions.
- Reduce your taxable income with an HSA contribution
If you’re in a high-deductible health plan, you might qualify for a health savings account (HSA). Your contributions are pre-tax, which reduces your taxable income, and may never be taxed if used for qualified medical expenses. The HSA contribution deadline for the 2024 tax year is April 15, 2025. The maximum total annual contribution for HSAs for 2024 is $4,150 for an individual account and $8,300 for a family. Those ages 55+ can make additional annual catch-up contributions of $1,000.
- Meet the IRA contribution limit for the year
IRA contributions made between Jan. 1 and April 15, 2025, can be designated for either 2024 or 2025. If you haven’t met your contribution limit for 2024, consider contributing to your traditional or Roth IRA by the April deadline. (You can do so in a lump sum if you’d like.) The maximum total annual contribution for traditional and Roth IRAs for 2024 is $7,000, or $8,000 if you are 50 or older.
- Traditional IRA: Your contributions during this four-month window may be eligible to be deducted from your 2024 taxes, depending on your income level and whether you (or your spouse) are covered by a retirement plan at work.
- Roth IRA: Your contributions won’t be tax deductible on your 2024 tax bill but designating them as a 2024 contribution allows you the flexibility to make additional contributions in 2024 provided you are still eligible. Roth IRA contributions are subject to income limits.
- Think ahead to the next tax season
It may seem early to start strategizing for 2025 taxes. But the sooner you start, the more flexibility you’ll have to pursue tax strategies that could benefit you.
As you prepare your 2024 taxes, here are a few considerations to keep in mind for 2025:
- Withholding status: Is your employer withholding too much, or too little, tax from your paycheck? If so, consider altering your withholding amounts for 2025. The earlier, the better.
- Itemize or take the standard deduction for 2025? If 2025 is shaping up to be a year where itemizing could work, consider how you can take early steps to maximize the tax benefit. For example, you could increase your charitable giving – just make sure to save all receipts for donations if you decide to itemize.
- Tax credits: Are there any new credits you can qualify for in 2025? Work with a tax professional to determine if your planned purchases or improvements might qualify based on your specific circumstances.
There is a lot to talk about here! Please contact us through the contact page HERE, directly to Joe Lind at jlind@dinergywealth.com or call Joe at 513-878-0195. Let’s grow together!
