Last-Minute Strategies to Reduce Your 2024 Tax Bill
As the end of the year approaches, financial experts highlight several strategies to lower your 2024 tax bill or increase your potential refund. With the tax landscape altered by the Tax Cuts and Jobs Act of 2017, finding ways to optimize your tax situation has become more challenging, but opportunities still exist.
Key Strategies:
- Boost Pre-Tax 401(k) Contributions
Increasing your pre-tax 401(k) contributions can significantly reduce your adjusted gross income. For 2024, the contribution limit has increased to $23,000, up from $22,500 in 2023, with an additional $7,500 catch-up contribution available for those aged 50 and older. This upfront tax break allows you to defer taxes until retirement when you will withdraw the funds. - Increase Paycheck Withholdings
If you anticipate owing taxes, consider adjusting your paycheck withholdings or making additional payments to the IRS. Life events such as marriage, divorce, or a new job can change your tax situation, and you can modify your withholding by submitting a new Form W-4 to your employer. Regularly reviewing your withholding can help avoid surprises at tax time. - Consider ‘Bunching Deductions’
Assess your itemized deductions to determine if you’re close to exceeding the standard deduction threshold. One effective strategy is “bunching deductions,” where you combine several years’ worth of charitable donations into one year. This approach may allow you to itemize in that particular year, maximizing your deductions. Financial planners often run projections to see how different strategies affect taxes in the current year.
Conclusion
While the Tax Cuts and Jobs Act has streamlined deductions, there are still ways to minimize your tax burden as the year concludes. By making proactive adjustments to your contributions, withholdings, and deductions, you can better manage your tax situation for 2024.
