As we head towards the April 15 filing deadline for your 2024 taxes, March is an important month to ensure that you have everything in order to file your return and to maximize your deductions and other benefits before filing.
Here are the top three money moves for March in preparation for filing your return.
1. Double-Check Deductions & Credits
Be sure to review your records to ensure that you have accounted for all deductions, credits and any other items that could reduce your tax liability.
Deductions might include:
- Student loan interest
- Mortgage interest and property taxes
- Charitable contributions
- Business expenses including a home office deduction if you are eligible
- Expenses incurred for a rental property you own
- Deductions for employee and employer (if you are self-employed) contributions to a retirement plan
Tax credits to review might include:
- The child tax credit
- Adoption tax credit (if you adopted a child in 2024)
- Education related tax credits
- Residential clean energy credit
- Electric vehicle tax credit
2. Maximize contributions to an IRA, an HSA or self-employed retirement plan
April 15 is the deadline for contributions to an IRA account or an HSA (health savings account) for the 2024 tax year.
The contribution limits for an IRA for 2024 are $7,000 with an additional $1,000 in catch-up contributions for those who are 50 or over. These limits are for contributions to all IRAs, both traditional and Roth.
Only contributions to a traditional IRA made on a pre-tax basis offer a reduction in current year taxes. If you are covered by a workplace retirement plan such as a 401(k), then there may also be income limitations1 that determine if you are eligible to contribute on a pre-tax basis. Participation of a spouse in a workplace retirement plan may also impact your eligibility.
An HSA must be in conjunction with an eligible high deductible health insurance plan. Annual contribution limits for 2024 are:
- Individual $4,150
- Family $8,300
- Additional contribution for those age 55 or over $1,000
Note if you were not enrolled in an eligible health plan for the full year these limits may be reduced. Additionally, once you are enrolled in Medicare, you are no longer eligible to fund an HSA.
If you are self-employed, you can still fund a retirement plan for your business with 2024 contributions through April 15. A SEP-IRA can be opened and funded up to your tax filing date. The contribution limits for a SEP-IRA for 2024 are 25% of your compensation from the business up to a maximum of $69,000.
If you have a solo 401(k), you can make a profit-sharing contribution of up to 25% of compensation up to a combined maximum of $69,000 or $76,500 for those 50 or over.
Both the SEP-IRA or solo 401(k) profit sharing contributions must be made to a traditional account in order to provide a current year tax benefit.
3. Organize Your Tax Documents
While this might sound basic and simplistic, it is critical that you have all tax documents ready and organized for your tax preparer or for yourself if you prepare your own return.
These documents can vary with your unique situation, but some common examples include:
- W-2s from employment income and any 1099s from self-employment or consulting income.
- Investment statements and 1099s for investments
- A mortgage statement from your loan provider
- Documentation for a major life change like buying or selling a home, buying or selling a business or an inheritance received
It is a good idea to take these documents and any others that will impact your income or expenses for the 2024 tax year and organize them. At the very least, organize them by income and expenses. If you are familiar with the sequence of your tax return you might even organize in that same sequence.
Many tax professionals send out a tax return organizer to their clients at the beginning of tax season. Getting your documentation in order can make preparation by your accountant or by you easier. More importantly, it can help ensure that you do not omit any income that could result in an IRS penalty or any expenses or deductions that could result in you paying more in taxes that you need to.
For more insights on tax planning for your investments and retirement accounts contact your Wedbush advisor.
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Wedbush Securities does not provide tax or legal advice. Please consult your tax or legal advisor.
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Wedbush Securities does not provide tax or legal advice. Please consult your tax advisor or legal professional for your specific situation.