Tax season is officially here, and 2023 is the best time to minimize your tax bill, maximize your refund, and take all available credits and deductions. These are people who started with taxes in mind.
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See: Do you owe money to the IRS? Most people don't realize they have to do this
Whether you did it or not, the chance is yours again. Now is the time to prepare for spring with a strategy to keep your money out of the hands of the IRS and set yourself up for success in 2024.
sponsor: Do you owe the IRS more than $10,000? Schedule a free consultation to see if you qualify for tax relief.
Start by filing 2023 on time — this year's tax day is actually tax day
Generations of earners could have predicted that tax day would arrive on April 15th. That all changed at the end of the 2010s, but it's about to change in 2024, so get ready.
In 2023, April 15th was a Saturday, but because Monday, April 17th coincided with Emancipation Day in Washington, D.C., tax day last year was April 18th.
The previous year, Emancipation Day in 2022 moved tax day to April 18, except for taxpayers in Maine and Massachusetts. April 18th was Patriot's Day in these states, so residents had until April 19th to file their returns.
In 2021, the tax day was postponed for more than a month to May 17th due to the impact of the new coronavirus infection, compared to 2020, when the tax day was postponed for three months to July 15th due to the outbreak of the pandemic. It was good.
But this year, things are finally getting back to normal and tax day will once again be on April 15th. Be prepared to avoid missed deadlines, penalties, and interest charges that derail your financial plans.
Next: Trump-era tax cuts expire — how changes will affect retirees
Last year is already decided — know about 2024
When the federal tax code was first enacted in 1913, America's tax code was approximately 400 pages long. By 2020, it had grown to approximately 75,000 pages. The IRS tax code is not only large and complex, but also constantly in flux with significant changes made each year, and 2024 will be no exception.
CPA Miles Brooks, director of tax strategy at CoinLedger, said, “There are a lot of changes in tax law, and it's important to review them or consult a professional to see how they affect your situation.'' It is important to do so.” “Take advantage of all deductions and credits. For example, the EITC is being expanded this year, and low- and moderate-income households will benefit.”
It's not just the earned income tax credit that has changed. In 2024, the standard deduction will be larger, the tax bracket will be expanded, and the rules for reporting payment app transactions via Form 1099-K will change. Important adjustments have been made to how business owners can deduct meals, mileage and depreciation expenses. The Secure 2.0 Act introduced several important changes to retirement savings in 2024. This includes rules governing early withdrawals, 529 balances, and required minimum distributions, as well as changes to charitable contributions and student loans.
These updates and many more could impact some of the most important financial decisions you'll make in 2024, including how much you can save for retirement and how much your employer can withhold from your paycheck.
Let's start by understanding this year's unique rules. Your financial future depends on it.
increase retirement allowance
Making the most of tax-advantaged retirement accounts is one of the most important keys to a financially secure retirement. To do that, we need to adjust our budget to allow a little more leeway in 2024.
Brooks noted that taxpayers can reduce their taxable income by taking advantage of this year's increase in annual contribution limits for 401(k) and IRA plans. The 401(k) limit is $23,000 and the IRA limit is $7,000. Catch-up contributions are also available for people aged 50 and over.
Open or contribute to other tax-advantaged accounts
Experts recommended opening a non-retirement account with a special tax designation in 2024, or if you already have one, adjusting your contributions according to this year's change in limits.
They include:
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529 College Savings Plan
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Coverdell Education Savings Account
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Health Savings Account (HSA)
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Flexible Spending Account (FSA)
Schedule your health exam and plan your deduction strategy today
If you anticipate large medical expenses, it's important to understand how the 2024 changes will affect your deduction strategy. Start by scheduling treatments and appointments, talking to your insurance company and health care provider, and planning your costs in advance.
“Plan your health check before the time is up,” says Brooks. “It typically takes time to secure an expert appointment, and this year the itemized thresholds are $14,600 or more for those filing taxes individually, and those who are married and filing jointly. That's over $29,200.”
This is important because those who itemize can only deduct expenses that exceed 7.5% of their AGI.
“You can spread out your medical bill payments over two years to maximize your deductible,” Brooks says.
keep a close eye on parliament
Ongoing legislative activity makes this an especially important year for tax planning.
“In 2024, it will be important to stay abreast of changes in tax law, especially the changes to the American Families and Workers Tax Relief Act currently under consideration in Congress,” says Steve, who has a master's degree in tax and has been in the business for 10 years. said Johan Garcia, a certified public accountant with experience in this field. Tax advisor, tax compliance, business advisor.
The bill passed the House by a vote of 357-70, an overwhelmingly bipartisan effort that is almost unprecedented in today's political climate. Now before the Senate, the legislation, if passed, would have a major impact on millions of taxpayers for tax years 2023, 2024, and beyond.
“This legislation includes changes to the Tax Cuts and Jobs Act (TCJA) that will be phased out in 2023, including bonus depreciation on qualified assets, EBITDA in interest expense limitations, immediate deductions for research and experimental activities, and an increase in the child tax credit. The purpose is to extend certain provisions.'' Mr. Garcia previously served as chief tax strategist for a Fortune 500 public company and is currently the owner and sole author of After Tax Cash, JG CPA. & Advisory is also a Principal. “All of these tax provisions will benefit small business, individual and family taxpayers.”
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This article originally appeared on GOBankingRates.com: Financial Expert: 6 Smart Ways to Tackle Your 2024 Taxes
