It’s hard to believe that tax season is right around the corner again. Thus, while planning Thanksgiving and Christmas shopping, many Americans are also setting time aside to restrategize their 2024 tax bill. Looking ahead, the Internal Revenue Service (IRS) has made subtle tweaks to filing rules, which could complicate things. And the nation’s exorbitantly high interest rates aren't helping either. The end of 2024 is upon us, but don’t wait until the clock strikes midnight on Dec. 31 to take action. The Wall Street Journal says these four moves could simplify and reduce your 2024 tax bill.
1. Reevaluate your estimated tax payments.
iStockIf you’re self-employed (freelancers, independent contractors, and other non-wage employees), the most important thing you can do right now is reevaluate your estimated tax payments.
As of Sept. 15, you should have made three quarterly estimated tax payments to the IRS. The fourth and final payment is due on Jan. 15, 2025. However, 90 percent of your total taxes due for 2024 are due by Dec. 31—if not, you’ll suffer financial penalties when you go to file in April.
Additionally, traditional employees whose income tax is withheld from their paychecks are susceptible to underpayment penalties. If you make too much or do not have enough money withheld, you could also get dinged by the IRS. The same Dec. 31 deadline applies to traditional employees, too.
For both groups, the rate of underpayments is eight percent. If you’re unsure about how much you should be withholding from your paycheck, use this helpful IRS calculator to get a personalized plan.
2. Review your standard and itemized deductions.
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Secondly, go over your standard and itemized deductions for 2024.
Deductible expenses include money put into your IRA, alimony payments, student loan interest, teacher expenses, business use of your home/car, and money allocated to health savings accounts, says the IRS. Itemized deductions include charity donations, home mortgage interest, capital losses, gambling losses, and losses from disasters and theft, per the agency.
The 2024 standard deduction is $14,600 for single filers and $29,200 for married joint filers. (According to an IRS press release, these numbers will increase by $400 and $800, respectively, for 2025.)
3. Determine if you're eligible for the Energy Efficient Home Improvement Credit.
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Next, if you’ve made energy-efficient improvements to your home, you may be eligible for a tax credit of up to 30 percent of “the total improvement expenses in the year of installation,” says the IRS.
The tax credits available are the Energy Efficient Home Improvement Credit (skylights, insulation materials, central air conditioning, water heaters, furnaces, heat pumps, and home energy audits) and the Residential Clean Energy Credit (solar, wind, and geothermal power generation, solar water heaters, and battery storage).
To see how much you could be saving on home-efficient upgrades, check out this handy calculator.
4. Start scheduled payments on inherited IRAs.
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Lastly, if you recently acquired an inherited traditional IRA, you’ll want to start making scheduled payments. The IRA's new guidelines state that heirs must withdraw the minimum amount each year over a maximum of 10 years.
It’s important to note that this rule is for non-spouse heirs only. Additionally, there’s no cap as to how much money an heir can annually withdraw. (In other words, you could withdraw the whole enchilada in one shot—though that could bump you to a higher tax bracket, so it’s best to consult an advisor.)
You can read more about the new guidelines, plus fine-print details here.
Best Life offers the most up-to-date financial information from top experts and the latest news and research, but our content is not meant to be a substitute for professional guidance. When it comes to the money you're spending, saving, or investing, always consult your financial advisor directly.
