The turn of a calendar year can feel like a call for change—you know, the whole “new year, new me” premise. That’s not to knock those starting fresh journeys toward healthier lifestyles, but from a planning perspective, the calendar flipping over doesn’t necessarily mean an immediate need for change. Instead, a little preparation now—like maximizing contributions and organizing key documents—can set you up for a smoother tax season and potential savings.
Tip #1: Maximize Your Contributions
- IRA Contributions:
- You have until April 15, 2025 to make contributions to your IRA for the 2024 tax year.
- The maximum contribution to IRAs for 2025 is $7,000, and $8,000 if you’re age 50 or older during the tax year.
- IRA contributions can be made to either a Roth (after-tax) or Traditional (pre-tax or after-tax) account, depending on the workplace plans available to you and your personal situation.
- HSA Contributions:
- If you have a high-deductible health plan (HDHP), you can contribute to HSA.
- The maximum contribution for 2024 is $4,150 for individuals with single coverage and $8,300 for those with family health plans.
- Keep in mind, HSA’s are triple tax-exempt and the only of their kind. Money goes in pre-tax, it grows tax deferred and comes out tax-free for medical expenses.
Tip #2: Organize Tax Documents
Properly organizing your tax documents now can save you time and reduce stress later. Key forms to look out for include:
- Items you already have on hand, like receipts for charitable contributions, medical expenses, and state/local taxes, which are often overlooked deductions.
- W-2s (from employers), 1099s (investment income or self-employment), and 1098s (mortgage interest).
- W-2s and 1098s must be sent by the end of January.
- 1099s vary based on the type of income, but most financial institutions aim to send them by mid-February.
- K-1s for partnerships or private investments or other forms specific to your situation will likely come later in the year.
Tip #3: Adjust Withholdings
- If your income significantly changed in 2024, now is the time to review your withholdings to avoid a large tax bill or penalties.
- For those with income that does not have regular income tax withholdings, be sure to make quarterly estimated tax payments that are enough to provide a safe harbor against IRS underpayment penalties.
Start Early, Stay Organized
Tax season doesn’t have to be stressful. By maximizing contributions, organizing your documents, and staying on top of withholdings, you can set yourself up for success and even find opportunities to save.
Contact us today to discuss your year-end tax planning needs and ensure you’re making the most of your tax situation. Here’s to an unforgettable 2025!
