Joseph S. Lania, CPA
Successful Businesses Count on CPAs

“21 Things That You Can Do Now To Save Taxes in 2024 and 2025”


What can we do to save our hard earned money and not overpay our taxes?

Review: Take out your 2023 tax returns NOW and review what was done, what wasn’t done and what you wished you did back then. Some events may have already passed (establishing your SIMPLE plan or working your next dependent) but many moves are still available to you for 2024 and 2025. We will take a look at some of these together.

Income: Do you have income coming to you that you can either accelerate or postpone? Some gains or bonuses that you planned on taking in 2024 that you can take next year instead? Or, expenses that you would normally deduct in ’24 that would help you next year? Real estate taxes on property or loan payments that you can prepay?

Bonuses: Do you have a business, or are you an employee, that normally utilizes year end bonuses to distribute income or share profits? The employer would like, obviously, to pay these out before year end and reduce the corporate income tax. The employee, however, would prefer to delay these taxable payments until next year and defer paying the tax on it until then. Either way, proper planning and careful timing will help.

Capital gains or losses: Review your portfolio for unrecognized gains and losses. If you have an excess of either, you can balance your 2024 activity by selling off some of your positions to maximize your current year tax. Be very careful of those mutual funds you hold that annually deposit capital gains into your year end reports. If you expect excess gains in ’2024, then dump some of your losers this year to offset the capital gain tax. You can always re-purchase these darlings next year. Same with an excess of current year capital losses which are limited annually. Sell off some winners and offset the tax, then re-purchase those you still think will do well.

Speaking of Capital Gains: If you have significant gains, and agree with many who feel that overall tax rates will increase in the near future, then you might want to consider taking advantage of the unprecedented low rates on capital gains at this time. Sell, pay the 20% tax and repurchase with new basis.

Mortgage and loans: If you have a substantial mortgage or loan obligation, consider making your January 2025 payment by the end of this year, and accelerate the deduction into 2024. Same with any real estate taxes owed.

Pension contributions and fringe benefits: Does your company offer a pension, a 401(k) or a 125 fringe benefit plan? Maximize these before year end. If you are an employee covered by such plans, do all that you can afford to contribute to the plan or document the allowable deductions to be reimbursed before you lose it.

Advance payments: If you are in business, consider paying some of your recurring expenses in advance. That publication in which you’ve advertised over the years has brought you significant business. Contact them and ask if they will give you a discount or additional ad-space if you agree to pay them next year’s (or, the next six month’s) fees in advance. They can use the cash flow and you can realize a savings PLUS a current year deduction.

Dividends: Do you own a closely held company? If you are receiving salary, commissions, rental income or any other form of compensation from a controlled corporation, investigate the possibility of re-classifying those otherwise normal tax rated payments into dividends, which are still taxed at a maximum federal rate of 20%. Discuss this with your tax advisor first.

Section 179 expenses: If you have a small business and the business has a need for new equipment, buying it before year end will accelerate the current year’s deductions and save you money this year. (ONLY if you need the equipment, new vehicle or other capital outlay should you consider this)

Charity: If you plan on any gifting, do it before year end. Remember that a cancelled check isn’t proof, you will need a statement or receipt for cash gifts exceeding $250 to any organization. Also, non-cash items must be documented and of good quality. No longer can you estimate or contribute discarded worn items for a legal deduction. Non-cash items must be of reasonably good quality for a tax deduction. Gifts of appreciated value held by you and contributed to a qualified charity are deductible at fair market value, which allows you an increased tax deduction without the gain being reported by you. You must secure and retain receipts.

IRA / SIMPLE Contributions: Now is the best time to fund that established SIMPLE plan or start a new IRA. Not only will you save current year taxes, but you will thank yourself later when you enjoy the benefits of responsible planning and timely investments. New plans normally must be initiated by October for a current year deduction. Do not miss this deadline.

Home office expenses: If you maintain a home office for your own business, or are required to maintain an office for your employer, then you are allowed to deduct those expenses required to maintain an office at home. Make a permanent record of the space that you use exclusively for business. Videotape it, take photos, keep a record so that when (if) the IRS challenges it 2-3 years from now, you will have the proof available.

Amendments: If you made a mistake in the past, and correcting it now will create a refund to you, then AMEND your 2023 and prior year’s return and enjoy the check when it comes to you. This is YOUR money and belongs to you.

Your W-4 form: Although this won’t save you taxes, it will save you aggravation when you file your tax return. Review NOW, before year end, all paystubs from employers and investments withholding taxes on your behalf to ensure that an adequate amount is being withheld. Compare the income and amount of tax withheld to last year’s return. It is enough? If not, change the amount withheld NOW, so that you don’t have a surprise when you prepare your tax return. A financial benefit of doing this is that any underpayment penalty that you would have been subject to would be avoided. That will save you money that you would have owed in penalties.

Mortgage and deed: Be sure that any mortgage on your principal residence that you plan on deducting the interest shows YOUR name and identification number and the property has your name on the deed. This means that Mom and Dad can’t buy the property for you in their name and have property which is deeded to them mortgaged to you. The mortgage and the deed should match; otherwise there will be correspondence with the IRS each year when they disallow your mortgage interest as a deduction.

Medical / Dental expenses: If you need a planned medical or dental procedure, try to schedule it before the year end and deduct the costs currently. Just like other itemized expenses, it may prove worthwhile to double up “every other” year to maximize your deductions.

Gifts to family and others: Non-charitable gifts that you plan on giving should be scheduled so that you can take advantage of annual limits and maximize your transfers of wealth to those you intend to bequest. This way, not only do you save gift taxes, you will personally see the enjoyment.

(Joke only!) Marriage: If you were planning on marrying, consider doing it prior to year end. If it is carefully planned, you may save on your total tax.

Dependents: Before the year end, be sure to review the social security card of all of your dependents. Be sure that the name shown on the card matches EXACTLY the name shown on your tax return. Do the same for the social security numbers. They have to match exactly. This is an important detail for new dependents and newly married individuals now filing jointly.

IRA distributions: As you age, you need to pay careful attention to any required minimum distributions. If you miss a required distribution, you might have a substantial penalty and, at a minimum, at least have a long conversation with the IRS explaining why you missed the distrib date. Call us if you have questions.

Remember this: Never use your money doing something SOLELY for tax savings. It is better to pay the tax and keep the remainder of YOUR cash in your pocket, then to make a decision solely for a tax deduction. Examples are; un-necessary mortgages on your property, sales of valued stock positions, non-benevolent charitable gifts, unnecessary business expenses, unscheduled equipment additions, dues paid to organizations that you don’t attend, or other tax-driven expenses.

At our trusted CPA accounting firm, we provide full tax and small business accounting services to local businesses in Cooper City, Pembroke Pines, Davie, Weston, Hollywood and all of Broward County. If you are starting a small business, we will help with the incorporation, all of the applications and compliance issues, we know what has to be done and we do it professionally. Small businesses are our specialty.

Actually, as CPAs we specialize in listening and then finding the right solution for your business. We are a local CPA firm in your area, giving accounting advice and we're Certified to help with our trusted services. IRS tax problems? No problem for us. Bring the IRS notice and we'll tell you exactly how to handle it.

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