Tax season is officially here, and the people who are in the best shape to minimize their tax bills, maximize their refunds and get every available credit and deduction are those who started 2023 with their taxes in mind.
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Whether you did or didn’t, the opportunity is yours once more. Now is the time to position yourself for success in 2024 by heading into spring with a strategy to keep your money out of the IRS’s hands.
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Start by Filing 2023 on Time — This Year, Tax Day Is Actually on Tax Day
Generations of earners could predict that Tax Day would land on April 15. That all changed at the end of the 2010s — but it’s changing back in 2024, so be ready.
In 2023, April 15 fell on a Saturday, but Monday, April 17 coincided with Washington, D.C.’s observance of Emancipation Day, so Tax Day was April 18 last year.
The year before, in 2022, Emancipation Day also bumped Tax Day to April 18 — except for taxpayers in Maine and Massachusetts. Since those states observed Patriots Day on April 18, their residents had until the 19th to file their returns.
In 2021, COVID-19 delayed Tax Day by more than a month to May 17, which was better than in 2020, when the pandemic’s debut postponed Tax Day by three months, until July 15.
But this year, things are finally back to normal, and Tax Day once again lands on April 15. Be ready so that missed deadlines, penalties and interest don’t foil your financial plans.
Next: Trump-Era Tax Cuts Are Expiring — How Changes Will Impact Retirees
Last Year Is in the Books — Get Acquainted With 2024
When federal tax law first emerged in 1913, America’s tax code was about 400 pages long. By 2020, it had grown to roughly 75,000 pages. The IRS tax code is not only massive and complex but constantly in flux, with important revisions emerging every year — and 2024 is no different.
“There have been a lot of tax law changes, and it is important to go through them or consult an expert about how they affect your situation,” said Miles Brooks, CPA, director of tax strategy at CoinLedger. “Take advantage of all the deductions and credits. For example, the EITC has been expanded this year, which means low- and moderate-income households stand to benefit.”
It’s not just the Earned Income Tax Credit that has changed. The standard deduction is bigger in 2024, tax brackets have been expanded and the rules for reporting payment app transactions through Form 1099-K have changed. There were important adjustments to how business owners deduct meals, mileage and depreciation. The Secure 2.0 Act ushered in several key changes to retirement savings in 2024, including rules that govern early withdrawals, leftover 529 funds and required minimum distributions, as well as changes to charitable distributions and student loans.
These updates and many others could impact some of the most important financial decisions you’ll make in 2024, including how much you save for retirement and the amount you ask your employer to withhold from your paycheck.
Start by getting up to speed with this year’s unique rules — your financial future depends on it.
Increase Your Retirement Contributions
Maxing out tax-advantaged retirement accounts is one of the most important keys to a financially secure retirement. To do that, you’ll have to adjust your budget to sock away a little more in 2024.
Brooks pointed out that taxpayers can reduce their taxable income by taking advantage of the increased maximum annual contribution for 401(k) and IRA plans this year — the maximum for 401(k)s is $23,000, and the IRA limit is $7,000. People over 50 can take advantage of catch-up contributions, as well.
Open or Contribute to Other Tax-Advantaged Accounts
Several experts recommended opening non-retirement accounts with special tax designations in 2024 or, if you already have them, adjusting contributions according to changes in this year’s limits.
They include:
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529 college savings plans
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Coverdell education savings accounts
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Health savings accounts (HSAs)
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Flexible spending accounts (FSAs)
Schedule Medical Exams Now and Strategize for Deductions
If you’re anticipating significant medical bills, it’s important to understand how changes in 2024 will impact your strategy for deductions. Start by scheduling treatments and appointments and talking to your insurance carrier and health care providers to plan ahead for costs.
“Preplan your medical exams before time lapses,” said Brooks. “Usually, it takes time to secure a specialist appointment, and this year, the threshold of itemizing is more than $14,600 for people filing their taxes individually and more than $29,200 for those married and filing jointly.”
That’s important, because those who itemize can only deduct expenses exceeding 7.5% of their AGI.
“You can spread your medical bill payments over two years to maximize your deductions,” said Brooks.
Keep a Close Eye on Congress
Current, ongoing Congressional action makes this an especially consequential year for tax planning.
“In 2024, staying abreast of tax legislation changes — especially concerning the Tax Relief for American Families and Workers Act currently under Congressional review — is critical,” said Johan Garcia, a CPA with a master’s degree in tax and more than 10 years of experience in tax advisory, tax compliance and business advisory.
The legislation passed the House by a vote of 357-70, an overwhelming bipartisan effort that is almost unheard of in today’s political climate. It’s now heading to the Senate, and if it becomes law, the act will have major implications for millions of taxpayers for tax years 2023, 2024 and beyond.
“This act aims to extend certain Tax Cuts and Jobs Act (TCJA) provisions that were phased out in 2023, including bonus depreciation for qualified assets, EBITDA in interest expense limits, immediate deductions for research and experimental activities and an increased Child Tax Credit,” said Garcia, who previously served as the lead tax strategist for a publicly traded Fortune 500 company and is currently the owner and sole author of After Tax Cash and principal of JG CPA & Advisory. “All these tax provisions are helpful for small businesses, individuals and family taxpayers.”
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This article originally appeared on GOBankingRates.com: Financial Experts: 6 Smart Ways To Approach Your Taxes in 2024
