Top Tax-Saving Tips to Consider Before 12/31

Dec 12, 2024

3 min read

GIFT GIVING........$18k is the annual tax-free limit that you can gift to any other person. Make sure you pay that person no later than 12/31. If you are married, you and your spouse can gift up to $36k to any one person. Amounts in excess of these limits aren't necessarily taxable but are required to be reported on a Gift Tax Return if you're planning to give more, it is best to reach out to me for guidance.

TUITION AND MEDICAL EXPENSES ........ If you paid these expenses for someone else, amounts paid directly to a school or a medical provider are not subject to the previously mentioned 18/36k annual limits. These are in addition to those limits,

DONATIONS FROM YOUR IRA (Qualified Charitable Distributions: "QCD")......... Up to $105k donated directly from your IRA can count towards your required annual minimum (RMD) distribution. For ex, if your IRA donates $10k to your favorite charity and your annual RMD is $50k, then only $40k needs to be distributed to you. Donating directly from your IRA can reduce your tax liability, so if this is part of your plan, it is best to reach out to me for guidance.

TAX LOSS HARVESTING......... It means that if you have net capital gains for the year, consider selling off loss positions to offset the gains. Keep in mind all positions have to be closed out (sold) by 12/31 to be effective for 2024.

DONATE APPRECIATED STOCK......... If you donate stock that you've held for at least a year (long term), you get a tax deduction for the market value of the stock on the date of donation. This means you don't need to sell the stock; just transfer it to the charity.

DONOR ADVISED FUND (DAF)............. If you donate regularly but just don't know which charity to donate to this year, consider a DAF. Open a DAF at your brokerage firm. It's essentially a savings account that can be used after funding the account to donate to your charity. The donation from the DAF can be made in a future year. Best of all, you get a tax deduction for the amount funded into the DAF this year. (You don't get another deduction when the DAF donates). This is best suited for someone who regularly donates but just doesn't know which charity to fund this year. Funding is due by 12/31

HEALTH SAVINGS ACCOUNT.........Annual contribution limits are $4150/single and $8300/family. If you're 55 or older, you can put in an additional $1k. HSA accounts require a "high deductible health insurance plan," and funds in the HSA are used to pay out-of-pocket expenses. You get a tax deduction for the contribution, and funding for 2024 is due by April 15, 2025. An often overlooked feature of HSA accounts is that the account can build up, and unused amounts carry over indefinitely. This means you can put off distributions until you are withdrawing from your 401k and/or IRA, so the HSA can essentially act as another type of long-term IRA savings account:

DONATIONS.........The annual limit is generally 50% of your total income. If you charge the donation, it needs to be charged (but not paid) by 12/31. If you pay by check or E-pay, make sure it's paid 12/31

401K V SEP-IRA........ In general, contribution limits on a 401k are more than a sep-ira. You can probably put away up to $5k more annually. So, If you are self-employed and already have a sep-ira, consider the 401k. Keep in mind that 401k plans need to be opened and partially funded by 12/31. But a SEP-IRA can be opened and funded as late as April 15. If you are interested in a 401k, it is best to call the brokerage firm where your sep-ira is currently held and find out about requirements for opening and annual reporting requirements.

REQUIRED MINIMUM DISTRIBUTION (RMD)............ After you are 73 years of age, you must take annual RMD from your retirement account. The RMD is based on your age and the market value of the account. RMD's are to be done by 12/31. Penalties kick in if not paid.