As we kick off 2025, now’s the perfect time to revisit your tax planning for 2024. There are still some great opportunities to reduce your tax liability and boost your savings before the tax filing deadline in April. Whether you're saving for retirement, maximizing your health savings, or making sure you’ve taken advantage of tax credits, here’s what you can still do:
You have until April 15, 2025, to make contributions for the 2024 tax year. The contribution limit for a Traditional IRA is $7,000 if you're under 50, and an additional $1,000 catch-up contribution if you're 50 or older. This is a fantastic way to reduce your taxable income and set yourself up for retirement. If you're above certain income limits, consider the backdoor IRA strategy to get money into a retirement account with tax-free growth.
If you were eligible for an HSA in 2024, you have until April 15, 2025, to make contributions. The contribution limits for 2024 are $4,150 for individual coverage and $8,300 for family coverage, with an additional $1,000 catch-up contribution if you're 55 or older. This is an excellent way to reduce taxable income while saving (and investing) for future healthcare expenses tax-free.
If you're self-employed or a small business owner, a SEP IRA is an incredible way to boost your retirement savings. You can contribute up to 25% of your compensation or $69,000, whichever is less for 2024, by your tax filing deadline, including extensions. If you haven’t set one up yet, it’s not too late! Just keep in mind that this is an employer-sponsored plan, so be sure to include all eligible employees when doing your analysis and execution.
For self-employed individuals, a Solo 401(k) is another great option. The plan must be set up by December 31, 2024, but you can still make employer contributions until your tax filing deadline (including extensions). This can allow you to contribute a significant amount and potentially lower your taxable income.
If you itemize deductions, you can make charitable contributions until December 31, 2024, and still claim them on your 2024 return. While this deadline has passed, it’s worth noting for future tax planning. But if you're in Arizona, you're in luck! Arizona is probably the only state that allows taxpayers to claim donations made in early 2025 as tax credits for the 2024 tax year.
Be sure to review available tax credits for businesses, such as the Work Opportunity Tax Credit, Credit for Small Employer Health Insurance Premiums, or credits for Qualified Business Income. These credits could directly reduce your tax bill, so make sure you're not leaving money on the table!
The tax code is complex and can change frequently, so it's always wise to consult a tax professional. They can provide personalized advice, help you identify errors or missed opportunities, ensure you're maximizing your tax savings, and help you navigate any new tax law changes.
These strategies can significantly help reduce your 2024 tax liability, but it’s essential to make sure they align with your overall financial goals and comply with IRS regulations. If you're uncertain, a tax professional can help guide you through the process and ensure you're making informed decisions.
At Baoba USA, we have two popular offerings during this time of year to help you maximize savings:
Don’t wait until the last minute—take action now, and it’ll pay off sooner than you think!
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