Maximizing Your Tax Return in December: Last-Minute Strategies to Boost Your 2024 Refund

As the year winds down, the final stretch of December offers a valuable opportunity to take control of your financial future by preparing for your 2024 tax return. Whether you want to lower your taxable income or qualify for additional credits, there are several strategies you can implement in these last few weeks of the year to maximize your tax benefits. Here’s a comprehensive guide to making the most of December for your 2024 tax return:

1. Contribute to Retirement Accounts

One of the most effective ways to reduce your taxable income is by contributing to retirement accounts like a 401(k), IRA, or Roth IRA. Here’s how you can make a difference in December:

• 401(k) Contributions: If your employer offers a 401(k) plan, you can contribute up to $22,500 in 2024 (or $30,000 if you're over 50). Contributions made by the end of the year can reduce your taxable income for 2024.
• Traditional IRA Contributions: You have until the tax filing deadline (April 15, 2025) to contribute to a Traditional IRA for 2024, but contributing before December 31st could provide a clearer picture of your tax situation and help you make adjustments.
• Roth IRA Considerations: While contributions to a Roth IRA won’t lower your taxable income, it’s still wise to maximize these contributions, as they grow tax-free for the long term.

2. Make Charitable Donations

If you’re looking to offset your taxable income, consider making charitable contributions before December 31st. Donations to qualified charities are tax-deductible, reducing your taxable income.

• Cash or Check Donations: Contributions made by check or online by the end of December will count toward your 2024 tax return.
• Non-Cash Donations: Donating goods like clothes, electronics, or furniture to charity can also provide deductions, but ensure you get a receipt for your donation and value your items accurately.
• Donor-Advised Funds: If you plan to give large amounts to charity over time, you can contribute to a donor-advised fund (DAF) in December, which allows you to get an immediate deduction while distributing the funds to charities in the future.

3. Sell Investments to Offset Gains (Tax-Loss Harvesting)

If you’ve had a profitable year in the stock market, selling losing investments can offset those gains and reduce your tax liability. This is known as tax-loss harvesting. By selling investments that have lost value, you can:

• Offset Capital Gains: If you’ve sold other assets for a gain, the losses can help reduce your taxable gains.
• Offset Ordinary Income: If your capital losses exceed your gains, you can use up to $3,000 of the losses to offset ordinary income, such as wages or salary.

Just be sure to sell the investments by December 31st to have them count for the 2024 tax year.

4. Take Advantage of Health Savings Accounts (HSAs)

If you're eligible for an HSA, it’s a great way to reduce your taxable income while saving for medical expenses. Contributions to an HSA are tax-deductible, and the funds grow tax-free.

• Contribution Limits: For 2024, the contribution limit is $3,850 for individuals and $7,750 for families. If you're 55 or older, you can contribute an additional $1,000 as a catch-up contribution.
• Use HSA Funds for Medical Expenses: If you’ve already maxed out your contribution, remember that HSA funds can be used to cover medical expenses without incurring taxes.

5. Review Flexible Spending Accounts (FSAs)

Flexible Spending Accounts (FSAs) offer another way to reduce taxable income by allowing you to contribute pre-tax dollars to pay for medical or dependent care expenses. However, most FSAs have a “use-it-or-lose-it” policy, meaning any unspent funds by the end of the year could be forfeited.

• Use Unspent Funds: If you have unused FSA funds, be sure to use them before the year’s end to avoid losing them.
• Replenish FSA Accounts: If you have an FSA for dependent care, ensure you’ve contributed the maximum allowable amount.

6. Consider Bunching Deductions

If your total itemized deductions for the year are just shy of the standard deduction, consider "bunching" deductions to push them over the threshold. This involves timing certain expenses, such as:

• Medical Expenses: If you have substantial medical expenses, you might consider scheduling medical procedures before the year ends to maximize your deduction.
• Charitable Contributions: If you typically donate to charity every year, consider making two years' worth of contributions in one year to "bunch" them and exceed the standard deduction.

7. Review Your Tax Withholdings

Before the year ends, it’s a good idea to review your paycheck withholdings to ensure you’re on track to avoid underpayment penalties or overpaying taxes. Use the IRS Withholding Estimator to check if you’re having the right amount of tax withheld from your paycheck.

• Adjust W-4 Forms: If you’ve experienced major life changes, like marriage, the birth of a child, or a new job, consider adjusting your withholding on your W-4 form to better reflect your current situation.
• State Taxes: When adjusting withholding remember to address state withholding as well.

8. Plan for Education Savings

If you have children and are saving for their education, you may want to contribute to a 529 College Savings Plan by December 31st. Contributions to a 529 plan are not federally tax-deductible, but many states offer state tax deductions for contributions.

• Maximize State Deductions: If you live in a state that offers a tax deduction, make a contribution before year-end to take advantage of that benefit.

9. Review Your Tax Situation with a Professional

If you’re unsure of how to optimize your tax return for the year, it’s always a good idea to meet with a tax professional. They can provide personalized advice based on your financial situation, ensuring you don’t miss out on potential deductions or credits. 

REVIEW

The last month of the year is a great time to review your financial situation and take steps to improve your 2024 tax return. From contributing to retirement accounts to making charitable donations or adjusting your withholding, these strategies can help you lower your taxable income, increase potential tax credits, and put you in a better position for a higher refund or lower liability. Be sure to act before December 31st to maximize your tax benefits for the upcoming year! Give us a call at 678-717-9818 and we can assist you with additional information to wrap up your year!!