Financial goals make excellent new year’s resolutions. And now, before the new year actually arrives, is the ideal time to think about your financial goals for 2024 and how those goals can contribute to a more effective tax strategy.
Maximize Tax Deductions and Credits
When you combine tax planning with a comprehensive financial plan, you can protect your money from unnecessary tax burdens. That means there’s more money available for your short-term and long-term needs and wants.
A good place to start is understanding the difference between a tax credit and a tax deduction.
A tax deduction is an expense that lowers your taxable income, such as the interest you pay on your home mortgage or student loans, out-of-pocket medical expenses and moving expenses from a job.
A tax credit is a lump sum amount that pays off a portion of your owed taxes. These include the Earned Income Tax Credit for lower-income working families, the Child and Dependent Care Credit that offsets the cost of child care and credits for improvements such as solar panels that make a home more energy efficient.
Neely’s Accounting Service can help you research which tax deductions and tax credits you may qualify for now or after a major life event, like getting married or having a baby. Then you’ll have the 2024 calendar year to save records and receipts needed for the next tax year.
Optimize Retirement Contributions
Setting aside savings for your retirement years should be at the top of your financial planning list.
Contribute to your workplace retirement account up to the employer match or to a traditional IRA. Money invested in either can be deducted from your taxable income for the year you made the contribution. In 2023, the IRS allowed a maximum $6,500 in IRA contributions, or $,7500 for people 50 and older.
Strongly also consider contributions to a health savings account, which allows you to set aside money to pay for future qualified medical expenses. Your HSA has three tax advantages:
- Contributions to these accounts can be deducted from your taxable income.
- Money in your account is invested and grows tax free.
- You won’t owe any taxes on money withdrawn and used for qualified medical expenses.
In 2024, the maximum HSA contribution allowed by the IRS will be $4,150 for an individual and $8,300 for a family.
Plan for Major Life Events
Another important piece of financial planning is to be prepared for major life events and any tax implications that come with them, such as getting married, having a child, or planning for educational expenses.
This is where a trusted financial partner, like Neely’s Accounting Service, can help you think through your options and create a financial blueprint that meets your unique needs.
Having clear financial goals and aligning them with tax planning strategies can have a significant impact on your financial resources in 2024. Our advisors are always ready to help you with personalized solutions that meet your needs and help you get the most of your financial resources in 2024.