Our Top 10 Pieces of Tax Advice

By Jeffrey Covert

Tax season is now upon us. Even though most deadlines have passed for lowering your taxes for 2023, there are a few options still available to lessen the tax bite. You should also consider strategies to lower your 2024 tax burden as well. 

Let’s discuss 10 effective ideas.

1. Get Organized

First, get organized. Make sure you obtain your Form W-2 from your employer and make copies, just in case. If self-employed, even with side gigs, obtain Form 1099s from all your customers. Remember to have all Form 1099-Is that are generated for taxable accounts each year. Have your mortgage statements available if you itemize deductions and the required health insurance attestation. If you’re self-employed, sort your receipts and credit card statements for business expenses and create a simple spreadsheet. Calculate any mileage you incurred for business purposes. 

2. Make Tax-Deductible Contributions

If you are not part of a work-related retirement plan (e.g., 401(k)), you still have time to make a tax-deductible contribution to a traditional IRA (up to $6,500 for 2023). Even if you are enrolled in an employer plan and your adjusted-gross income isn’t too high, you also still have until April 15 to contribute to a Roth IRA (same maximums as the traditional IRA) for 2023. While the Roth contributions are not tax-deductible, the earnings of a Roth IRA are tax-free.

3. Make Catch-Up Contributions

Did you turn 50 years old last year or are reaching 50 this year? Remember that all taxpayers who are 50 years old or more are entitled to contribute more to their retirement savings each year (called a “catch-up contribution.) For 401(k) plans, this amount is $7,500 for both 2023 and 2024 and $1,000 for traditional and Roth IRAs.

4. Reexamine Your Employer Retirement Contributions

Tax season is a good time to reexamine your contributions to your employer retirement account. Are you taking full advantage of the employer match? While the employer match is not deductible for the employee, making that extra contribution to maximize it could help lower your taxable income for the coming years.

5. Don’t Forget About RMDs

If you reached age 72 last year and did not take your required minimum distribution (RMD) from your retirement accounts, don’t panic! Under the SECURE Act 2.0, the first RMD age was increased from 72 to 73 in 2023, so 2024 will be the year to take your first RMD. In addition, you have until April 1, 2025, to make your first withdrawal, so you have some flexibility. Bear in mind that if you wait until 2025 to take your 2024 RMD, you’ll still need to take another distribution in 2025 to fulfill that year’s requirement.

6. Consider a Roth Conversion

If your income is significantly lower this year (e.g., you’re now unemployed or retired) consider a full or partial Roth conversion for your traditional IRA or IRA rollover. If you’re in a lower tax bracket now, it could be a savvy tax move to pay the tax on the conversion this year and allow the remainder to grow tax-free as a Roth IRA for the future.

7. Consider Opening an HSA

Those in a high-deductible medical insurance plan but not yet on Medicare might consider opening a health savings account (HSA). The earnings in such accounts are tax-free, and these accounts can help with medical or other expenses in the future. 

There are contribution limits: $3,850 for single, $7,750 for family for 2023, and $4,150 for single, $8,300 for family for 2024, and a $1,000 catch-up allowed for those over age 55. There are no income restrictions, and you have until April 15th to make a 2023 contribution.

8. Consider Charitable Donations

If you have highly appreciated assets, like common stock in a brokerage account, consider donating these assets to a charitable concern. Many investment companies like Charles Schwab offer programs where an investor can make charitable donations to an investment account (including appreciated stock) and receive a tax deduction for the value of the contribution but defer naming the charitable cause until later. In the case of appreciated stock, the realized gain is not taxable and the entire value provides a nice deduction.

9. Consider Starting a Business

Thinking of starting a small business or a side gig? Small business owners can take a myriad of legitimate tax deductions against income. Even if your business isn’t profitable the first or second year, the tax deductions still count toward lowering your tax bill.

10. Consider Making Energy-Efficient Home Improvements

Does your home need some maintenance or improvements? Many tax deductions and credits are still available for making energy-efficient improvements on your home, under the Energy Efficient Home Improvement Credit program.

Bonus Tax Tip: Partner With a Professional

Taxes are generally not a pleasant task, but implementing some of the above tips can ease the pain of tax season and help shore up your finances for the future. Be sure to consult with a knowledgeable tax professional about any of these ideas, the rules, and how they may apply to your own tax situation.

Don’t have a tax professional in your corner? We at Barnett Financial & Tax are here to help! Our team is highly experienced in tax planning; we can assess your tax liabilities and develop strategies to minimize what you pay to help you build, preserve, and enjoy their wealth. To schedule a complimentary consultation, call (800) 425-7044 or email sarah@bftwealth.com

About Jeffrey

Jeffrey Covert is Executive Vice President of Barnett Financial & Tax, a financial services firm helping people build, preserve, and enjoy their wealth in Grand Blanc, MI, Auburn Hills, MI, and Charlotte, NC. With more than 20 years of experience as a Certified Public Accountant, Jeff is the firm’s tax specialist and one of the firm’s Investment Advisor Representatives. Focusing on building client relationships based on a foundation of integrity and honesty, he specializes in strategic tax and retirement income planning. In all he does, he strives to provide the clarity and confidence clients need to embark on the next chapter of their lives. 

In addition to his degree in accounting from Northwood University in Midland, Michigan, Jeff holds his Certified Public Accountant, Life, Accident, Health, and Property & Casualty insurance licenses, and has passed the Series 7, 63, and 65 securities exams. Jeff lives in Rochester, Michigan, with his wife, Michele, and their three children: Mitchell, Justice, and Vivian. He spends his spare time enjoying bike rides, playing games, and watching movies with his family. He also tries to get in a few rounds on the golf course as often as possible. Valuing family and hard work above all else, Jeff’s biggest influences were his grandparents, who demonstrated the importance of helping others with love, warmth, and a sense of humor.

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