As the year draws to a close, it is important to assess your financial situation and consider strategies to optimize your tax position for the upcoming tax season. This year-end tax planning guide serves to help you make informed decisions that can positively impact your tax liability.
Year-End Tax Planning Steps:
Individual Planning:
- Take a closer look at your income and expenses for the year to determine if there are any opportunities to reduce your tax liability. Consider deferring income to next year or accelerating expenses into this year, whichever is more beneficial to your tax situation.
- If you have investments that have declined in value, consider selling them before the end of the year to offset capital gains from other investments. If you have investments that have increased in value, consider selling them before the end of the year to offset capital losses from earlier sales.
- If you plan to make charitable contributions, consider donating appreciated assets, such as stocks or real estate, to maximize your tax benefits. Be sure to keep proper records of your donations for tax purposes.
- Take Required Minimum Distributions. RMDs are taxable income and must be withdrawn by year end or a penalty applies. If you have a favorite charity, consider a qualified charitable distribution (QCD) from your IRA. The distribution is not taxable as it is, in practice, offset by the charitable donation.
- Consider itemizing deductions in one year if you usually take the standard deduction. This strategy, known as “bunching” can help you exceed the standard deduction threshold and maximize your deductions. For example, pay your 2023 and 2024 contributions in 2023 to get enough deductions to itemize. Use the standard deduction in 2024.
Business Planning:
- Review your business expenses. If you are a cash basis business owner, postponing billings and accelerating deductible expenses may provide substantial tax savings.
- Take advantage of the Section 179 deduction and bonus depreciation for eligible business equipment purchase and placed in service by the end of the year. These deductions can reduce your taxable income.
Thank you for entrusting us with your financial needs. We look forward to assisting you in optimizing your tax position and achieving your financial goals in the coming year.
Very truly yours,
CARABELL, LESLIE AND COMPANY
Professional Corporation
Certified Public Accountants
Click below for 2023-2024 Tax Planning Guide