UNLOCK 4 IMMEDIATE TAX-SAVING STRATEGIES BEFORE FILING YOUR 2023 TAXES

ARI BAUM, CFP®

Taxpayers have plenty to be concerned about in 2024 — economic uncertainty, geopolitical risks, inflation, and interest rates. A contentious 2024 presidential election could inject even more uncertainty and market drama. On top of all that, many of the provisions in the 2017 tax cuts and jobs act are scheduled to expire next year unless lawmakers extend them.

WHAT COULD THAT MEAN FOR YOUR TAXES?

• If President Biden is re-elected, his budget could increase taxes on high-net-worth Americans.
• Capital gains tax rates could increase to ordinary income rates, rather than topping out at 20% as they do now.
• High-income taxpayers could face limits on their retirement contributions and lose the ability to convert after-tax money into a Roth in certain circumstances.

WHAT CAN YOU DO?
The current tax rates might be the lowest you’ll see for the rest of your life, and I want you to make the most of them. It’s more important than ever to make sure you’re taking advantage of every tax edge you possibly can this year. Acting now could be critical because you might not have the ability to seize these opportunities in future tax years. I want to emphasize that this is a limited opportunity to leverage current laws. The 2017 rules are scheduled to expire in 2025 (if they don’t disappear sooner under a new administration), and most taxpayers will see a tax hike. Fortunately, there are strategies you can use right now to make sure you don’t pay more than your fair share in taxes.

1) MAX OUT YOUR TAX-DEFERRED ACCOUNTS IN 2024
One of the tax-savviest moves you can make in 2024 is to optimize your contributions — especially before April 15, because it’s your last opportunity to make some last-minute retroactive contributions for 2023 that could immediately lower the taxes you pay. And the savvy tax moves can go way beyond your retirement plan.
Have you squeezed every ounce of juice from all your tax-deferral opportunities?

• HSA contributions if you have a high deductible healthcare plan.
• 529 contributions.
• After-tax contributions to your 401(k).
• Ensuring you have the right self-employment retirement accounts in place.

2) PREPARE YOUR PORTFOLIO FOR EXPIRING TAX CUTS
Have you checked for embedded capital gains in your investments? If so, you may want to consider taking action now, before the tax hammer gets even heavier. Harvesting them now under a favorable tax regime where the top rate is 20% could be beneficial if capital gains lose their favorable tax treatment in the near future. Taxes are just one part of your overall investment picture, but it could offer an opportunity to make tactical investment changes where prudent.

3) HARNESS A “MEGA-BACKDOOR” ROTH IN 2024
Have you maximized your opportunities to create tax-free income? Currently, savvy investors who have the ability to use a mega-backdoor Roth are doing so by adding after-tax contributions to their 401(k)s and then converting to Roth IRAs. This strategy could be eliminated forever under future administrations, so if a mega-backdoor Roth strategy sounds interesting, consider it before it’s too late.
With your 2023 tax and investment documents in hand, we can look for favorable Roth conversion opportunities under the current rules.
Not all 401(k) plans allow for this strategy. However, if you have pretax money that you put in any type of retirement account, you may still want to convert some of it to a Roth (in moderation). The entire amount of the conversion is taxable income to you, but it may still make sense in view of your overall tax strategy.

4) PLAN TO BUNDLE UP AND SAVE IN 2024
Under current tax laws, it’s harder to use itemized deductions to save on your taxes. The standard deduction for taxpayers who are married filing jointly is $29,200 and $14,600 for single filers in 2024. That puts the bar a little higher each year, but savvy taxpayers know how to combine deductions to make it past the standard deduction threshold. 2024 and 2025 may be critical years for this technique as we don’t know what will happen to deductions if current laws expire.
How can you use this opportunity in 2024? Now’s the perfect time to take a look at last year’s expenses and plan ahead for the following opportunities:

• Bundle up and make several years’ worth of charitable deductions this year.
• If possible, plan medical procedures for this year rather than wait until next year, to meet the 7.5% of AGI floor for medical expenses.
• Tax-savvy note: Items such as long-term care insurance premiums and home modifications for aging in place are medical expenses that may help you reach the 7.5% AGI.

FIND TAX-SAVING AVENUES IN 2024 BEFORE THEY VANISH
You’ve worked hard and deserve to pay no more than your fair share. And right now, with all the market and political uncertainties, it’s very hard to know what the future may hold. There are currently opportunities for tax savings –– but they could disappear at any time. Many are expected to expire in 2025, making tax strategies especially critical this year. Some of these maneuvers are a little more complex and require the help of knowledgeable professionals to make sure that you don’t end up on the wrong side of your current tax bracket — or the IRS.
You’ve already started to build a significant fund for your retirement years, and by consulting with competent specialists, you can keep more of it rather than handing it over to the IRS.

The content is developed from sources believed to be providing accurate information. Investing involves risk including the potential loss of principal. This information is not intended to be a substitute for specific individualized tax or legal advice. Consult with a licensed professional regarding your specific situation.

Ari Baum, CFP® is the founder and CEO of Endurance Wealth Partners, with over 26 years of experience in the Financial Services industry. He brings his in-depth experience to Conceive. Believe. Achieve. for his clients.
Securities and Advisory services offered through Prospera Financial Services Inc. Member FINRA/SIPC. Brokerage and Advisory accounts carried by Wells Fargo Clearing Services, LLC.