Tax moves to make before 2024 ends

In this Master the Green you'll learn:

💰 3 tax moves to make before year end

💰 How tax planning can save you $1,000s

AND

⛳ Why taxes are like penalty strokes on the golf course

One part golf, all parts money

Let's tee this one up🏌️

Dear MTG Subscriber - Two quick things...

First, "THANK YOU." Thank you for showing up. Thank you for all the like, comments, emails, texts, and calls. Your feedback helps me keep creating on those days when I'm staring at a blank screen. You keep showing up, and I'll keep grinding newsletters out.

Second, this will be my last newsletter of 2024. I'll be traveling over the holidays and trying to spend as little time as possible staring at screens. If you need your fix of 'one part golf, all parts money' my book Golfer's Guide to Money is available on Amazon. It also makes a great last minute gift for that golfer on your gift list.

See you in 2025!

Judd

Minimize your penalty strokes

Taxes are like penalty strokes on the golf course.

You already know that success on the golf course depends on avoiding penalty areas like water and out of bounds.  Success on your financial course depends on you avoiding unnecessary penalties like fees, high interest rates, and taxes.

Out of these three, taxes are hardest to avoid, but there is something you can do about it. 

Every dollar you pay in taxes is one less dollar to invest, save, or spend on what matters most to you.

For high-income couples, the stakes are even higher. Consider this:

• With $200,000 of taxable ordinary income, you’ll pay roughly $37,000 in federal taxes.
• At $300,000, that number jumps to $67,000.
• And with $400,000, your federal tax bill skyrockets to nearly $100,000.

That’s a significant chunk of dollars going straight to the IRS. But with strategic year-end planning, you can chip away at that tax liability and keep more of your wealth working for you.

Are you leaving money on the table? 

Here are some of the most common opportunities you might be missing—and how you can take advantage of them before December 31st:

Year-End tax moves to make before 2025

As a high earner, you understand the importance of keeping more of what you earn. But with the year quickly coming to a close, now is the time to take action to minimize your tax liability and maximize your savings.

Keep more of your cash flow in the fairway this year by taking advantage of these moves: 

1. Max Out Retirement Contributions

Make sure you’re taking full advantage of tax-advantaged retirement accounts like your 401(k) and IRAs.

For 2024, you can contribute up to $23,000 to your 401(k) if you’re under 50, or $30,000 if you’re 50 or older.

Contributions to traditional IRAs may also be tax-deductible depending on your income, and don’t forget that your spouse can also contribute to an IRA – even if they’re not working!

2. Harvest Investment Losses

It’s been a good year in the markets, so losses may be hard to come by, but now is the time to identify any underperforming assets and decide if it’s time to part ways.

If you sell an investment in your taxable brokerage account at a loss, that loss can offset capital gains from successful investments you sold, or if your losses total more than your gains you can also apply up to $3,000 of losses to offset your ordinary income. 

Any unused losses will also carry forward to future years, making this a long-term tax planning strategy.

3. Leverage Key Itemized Deductions

If you itemize your deductions, ensure you’re maximizing these common categories:

• Mortgage Interest: Deduct interest paid on up to $750,000 of mortgage debt.
• State and Local Income Taxes (SALT): Deduct up to $10,000 of combined state income and property taxes.
• Medical Expenses: If your out-of-pocket medical costs exceed 7.5% of your adjusted gross income (AGI), they may be deductible.

(If you don’t spend that much on health care, you can achieve some tax savings by using a Flexible Spending Account or Health Savings Account instead)

• Charitable Contributions: Donations to qualified charities can reduce your taxable income significantly. Consider gifting appreciated securities for additional tax savings.

How one high-earning couple saved $1,000s with a few simple moves

I recently helped a client reduce their tax bill by $3,000 with just a few simple moves.  You might be able to take advantage of the same strategy.

This couple has $300,000 of taxable income between two salaries, bonuses, and vesting RSUs.  Both had already maxed out their 401ks for the year and we were searching for additional tax savings opportunities.  Since they were in the 24% marginal tax bracket, every dollar of deductions we could find would yield $0.24 in Federal tax savings.    

They purchased their dream home in 2022.  While the mortgage payments were significant due to higher interest rates, we also saw an opportunity to take advantage of additional deductions. 

With over $20,000 in mortgage interest payments and $10,000 of State income taxes, they were already itemizing their deductions, as opposed to taking the standard deduction of just $29,200 in 2024.  This presented an additional opportunity to take advantage of charitable deductions. 

The couple usually gave $1,000-$2,000 to charity each year, but since it was a higher income year for them, we discussed making a larger contribution to a Donor Advised Fund.  This would allow them to take advantage of additional deductions in the current year, while continuing to give at a rate that was comfortable for them in future years. 

We donated $10,000 of stock (vested RSUs that had significantly appreciated after the one spouse’s company’s stock surged) to the Donor Advised Fund.  Not only did the donation save the couple $2,400 in taxes, but we also avoided $7,000 of taxable capital gains by donating the company stock.    

The result? 

Two simple strategies – funding a Donor Advised Fund with multiple years of charitable gifts and giving company stock – saved this couple $1,000s in taxes. 

Are you losing strokes to taxes?

Could these strategies work for you?  Possibly. 

Here’s what you need to know before December 31st, 2024. 

What is your taxable income this year? 

Your taxable income is your gross income minus any deferrals or deductions

What’s your projected marginal tax rate?

Use this table

Will you be using the standard deduction or itemizing this year?

State and local taxes, mortgage interest, and charitable gifts are some of the most common itemized deductions people in their working years use. 

Still not sure? 

If you’re a high earner who wants to pay less in taxes and build more wealth, tax planning is a big deal.  Reach out to your financial advisor or tax professional to explore how these strategies fit your situation.

If you need more help, there's three ways I help people like you:

1.  Ask me anything – Do you have money questions?  Are you over asking friends or the internet for advice?  As a newsletter subscriber, I’m happy to take 30 minutes out of my day to help you.  I'll do my best to be sure you leave with something of value to consider.

2.  Get a one-time financial plan - Over the course of 90 days, we'll strive to help you get financially organized and offer up recommendations to achieve your financial goals.  You'll leave with answers to questions like:

Am I saving enough for retirement?

How can we pay less in taxes?

Do we need life insurance?

3.  Get fee-only financial advice - Hiring a financial advisor is a decision most people only make once in their lives - so we don't take it lightly.  We'll go through a three step process to show you how we work with clients, and let you make the decision if it's a good fit for you or not. 

If you've never considered hiring an advisor before, this is a great way to see what comprehensive financial planning looks like.

Schedule a 30 minute call to get started today.