Mid-Year Tax Planning: Key Strategies to Optimize Your 2024 Taxes – Part 1

As we are now past mid-year and into the second half of 2024, it’s the perfect time to take a closer look at your tax situation and make adjustments to minimize your tax burden come April. Here are some ideas for mid-year tax planning that can help you stay on top of your finances and make the most of available opportunities.

Review Your Year-to-Date Paystub: Earnings and Withholdings

Start by examining your most recent paystub to ensure your earnings and withholdings are on track. Verify that your tax withholdings are aligned with your expected annual tax liability. If you’ve had a significant change in income or your financial situation, you might need to adjust your withholding to avoid underpayment penalties or overpaying taxes.

Evaluate Investment Income and Capital Gains

Take a moment to review your investment portfolio. Consider the impact of any realized capital gains or losses and how they might affect your tax liability. If you have significant capital gains, you might want to explore strategies such as tax-loss harvesting, where you sell investments at a loss to offset gains. Additionally, if you're close to the threshold for higher capital gains taxes, you might adjust your investment strategy to minimize the impact.

Understand Required Minimum Distributions (RMDs)

If you’re age 73 or older or will turn 73 by the end of the year, remember to plan for Required Minimum Distributions (RMDs) from your retirement accounts. Ensure you’ve met your RMD requirements to avoid hefty penalties. Keep in mind that if you’ve reached age 70½ and are still working, you might be able to delay your RMDs from your current employer’s retirement plan.

Consider Charitable Contributions

Charitable contributions can be a smart way to reduce your taxable income while supporting causes you care about. If you’re considering making charitable donations, think about whether it makes sense to donate appreciated assets instead of cash. Donating appreciated stock can provide you with a charitable deduction and allow you to avoid paying capital gains taxes on the appreciation.

Maximize Retirement Contributions

Evaluate your retirement contributions to ensure you’re on track to meet the annual contribution limits for tax-advantaged accounts like 401(k)s and IRAs. Increasing your contributions can reduce your taxable income and help you build a more secure financial future. For 2024, the contribution limits are $23,000 for 401(k)s (with an additional $7,500 catch-up contribution if you’re 50 or older) and $7,000 for IRAs (with a $1,000 catch-up contribution for those 50 or older).

Plan for Making Tax-Free Gifts before Year-end

If you’re looking to reduce your taxable estate, consider making gifts to family members or others. For 2024, the annual gift tax exclusion is $18,000 per recipient. Gifts within this limit are not subject to gift tax and can help you shift wealth to your heirs while reducing your estate tax liability. 

The tax regulations can be complex, and many taxpayers are often unaware of opportunities that may be applicable, depending on each taxpayer’s specific situation. Contact your tax advisory CPA at Stone for a tax advisory consultation.

Watch for more tax saving tips in Part 2 of this series, Mid-Year Tax Planning - Key Strategies to Optimize Your 2024 Taxes

Diane West is a tax director at Stone & Company and oversees tax and advisory services at the firm. Stone & Company, LLC is a CPA firm based in Lexington Massachusetts. www.stonecpas.com