2024 Tax Planning

Congrats! You just finished paying your 2023 taxes! Now is the perfect time to get started on tax planning for 2024. If you have any questions on the tips below, Book A Meeting with me directly.

1) Qualified Business Income (QBI) Deduction: If you run a small business you may be eligible to deduct 20% of your business income. The income limits for the full deduction in 2024 are $191,950 (single), and $483,900 (married). If you expect your income to be around these figures, some advanced planning can help ensure you get the full benefit.

2) Roth IRA Conversions: If you are in a low tax year, due to a drop in income, you may want to convert your Traditional IRA into a Roth IRA. You will pay (low) income tax on it today, but it won’t be taxed again.

3) Roth IRA Contributions: If your income will be less than $146k (single) or $230k (married) in 2024, you can contribute up to $7,000 into a Roth IRA. Contributions and earnings are then withdrawn after age 59½ tax-free.

4) 529 College Savings Plans: Cash is invested and enjoys tax-free growth and withdrawals, if the money is used for a qualified college expense like tuition, room & board, etc. Also, contributions made in 2024 may be eligible for a tax deduction this year (see the map below for details).

5) Health Savings Account (HSA): Triple tax-exempt. Funded with pre-tax money, grows and withdrawn tax-free, as long as it is used to pay for qualified medical expenses. The HSA also goes with you if you change jobs.

6) Exchange Traded Funds (ETFs): Active mutual fund portfolio managers try to beat the market by buying and selling constantly. These transactions are taxable events. Those taxes accumulate within the fund and are distributed to the shareholders (you) at the end of the year. Rotating out of active mutual funds into ETFs can significantly lower your capital gains taxes.

7) Asset Location: Index funds, ETFs, and tax-exempt muni bonds belong in taxable trading accounts. Actively managed mutual funds, taxable bonds, and REITs belong in a tax-deferred account like a 401(k). Knowing which kinds of investments belong in which accounts helps save money in taxes.

8) Solo 401k: If you are a solopreneur, you can contribute to your 401k plan twice, up to a max limit of $69,000 in 2024. Put away up to $23,000 as the employee, and up to 25% of your income as an employer match. This can generate tremendous tax savings