THIS IS MY TWO WEEKS NOTICE

You! Yes, YOU! Sitting there, reading this blog post. This is my two weeks notice.

Two weeks and two days from now, it’s going to be a new year.

Shortly after, you’ll receive your first W-2, 1099, or K-1 for 2024.

And that’s when you’re going to start thinking about your 2024 taxes. And guess what? There’s not much you can do to lessen your tax burden by then. If you’re eligible, maybe make a contribution to your IRA or SEP. In reality, that’s about it.

However, you can do a LOT now. If you’re an individual, things like charitable contributions or paying estimated state or local taxes can be deductible against your 2024 federal taxes.

Did you decorate for the holidays? Are there some things you took down that won’t be going back up when the season is over? Donate those before the end of the year! Now is a great time to clean out the closets and the basement. Non-cash donations can be an itemized deduction. Be sure to use an appropriate value. If you’re donating items with a value over $500, you’ll need to file form 8283 with your return. If there are any items over $5,000 in value, an appraisal is required.

Take a look at your mortgage interest. Each year, the amount of interest you pay slowly declines. Combined with the limitation on state and local taxes allowed to be deducted, you may be close to the standard deduction. If you’re getting close, take advantage of the time you have now. Make charitable contributions while you are still itemizing your deductions. Charity, while a wonderful and necessary part of a life well lived, are only considered “deductible” if you’re itemizing your deductions. Once your mortgage is paid off, if your taxes paid and charitable contributions (and medical expenses above the threshold) aren’t greater than your standard deduction, you don’t save anything on your federal taxes by donating.

What about medical expenses? Generally, unless your medical expenses exceed 7.5% of your adjusted gross income (AGI), there’s no deduction. However, if you have an HSA, you can contribute dollars pre-tax to reduce the cost. If you have a flexible spending account or FSA, remember that most plans are “use it or lose it,” so refilling prescriptions, buying durable medical equipment, and scheduling appointments before year end can maximize the value of your contributions. If you have not submitted receipts for reimbursements for items you purchased that are eligible, you usually have a couple of months after year end to submit, but each plan is different, so check with your FSA provider. Most employer-sponsored medical insurance plans are paid with pre-tax dollars, so there is no separate deduction for those. However, since you are already paying them PRE-tax, it has the same effect as being a deduction. You do not get to put those on your itemized deductions, however.

Are you a business owner? Starting retirement plans, purchasing new equipment, prepaying some expenses, and looking for eligible credits now can make a big difference in what you will owe for this year. 

Should you buy new equipment? Not if you don’t need it. A deduction reduces your taxes by your marginal tax rate, so it doesn’t give you back a dollar for a dollar spent. We recommend making purchases ONLY if you see a need for the equipment in the near future, and carefully planned. It’s not beneficial to take the deduction in 2024 if you believe you’ll be in a higher tax bracket in 2025. 

Small businesses can get tax credits for setting up retirement plans. The startup credit can be up to $5,000. There’s also an employer contribution credit that can be up to $1,000 per employee, per year for 5 years!

What other credits are available? Research and development credits, Plug-In Electric Drive Vehicle and alternative motor  vehicle credits, work opportunity credits, employee retention credits, and others are available, if you qualify.

Once the year ends, a lot of those options are off the table.

Again, THIS IS MY TWO WEEKS NOTICE. Look now!

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