Tax considerations 2024

You filed your taxes – you’re done, right?  Not so fast!  Now is the best time to review your return to set yourself up for success this year.  Here are our top 5 tax considerations for 2024:

Did you fail to withhold or underpay your estimates?

If so, review Form 2210 and Form 1040, Line 38, to see if you paid a penalty. This is called the “Safe Harbor” requirement. It’s surprising how many clients don’t realize a penalty was baked into the total. The IRS will penalize you if you don’t have enough withheld throughout the year, either via withholding on your W-2 or quarterly estimates.  You can “protect” yourself from an underpayment penalty if:

  • You pay at least 90% of the tax you owe for the current year, or 110% of the tax you owed for the previous tax year (100% if your previous year’s Adjusted Gross Income is less than $150,000), or
  • You owe less than $1,000 in tax after subtracting withholdings and credits.

**State penalties are often more severe than the Fed’s. Remember this when calculating your withholding for the year. 

Are you (or should you be) making quarterly estimated tax payments?

If so, be mindful that estimates must be paid evenly throughout the year, even if your income is choppy, to avoid underpayment penalties.

Quarterly estimates for federal taxes are due on April 15th, June 15th, September 15th, and January 15th.  Some states have different payment schedules, especially if you are making Flow-Through Entity Tax payments (a topic for another blog), so please be mindful of this.

The Tax Cuts & Jobs Act is expiring next year – is this your year for a Roth conversion?

Tax rates for everyone may increase 2-7% in 2026, baring new tax legislation. Is this your year to convert funds from pre-tax to post-tax? A Roth conversion may make sense for you.

There are no income limits and no max conversion for this strategy.

Are your retirement contributions deductible?

The IRS increased the maximum contributions for 2024. Are you on track to max these out? If not, are you at least contributing enough to receive the employer match?  Do you need to reallocate your contributions between pre-tax & Roth?

  • 401(k)s/403(b)s – limits increased to $23,000 ($30,500 if over age 50)
  • SIMPLE IRAs – limits increased to $16,000 ($19,500 if over age 50)
  • SEP IRAs – limits increased to the lesser of 25% of total compensation or $69,000

Is your health-care plan HSA eligible?

Did you switch to a high-deductible plan in 2024? If enrolled, let’s ensure you’re on track to max this one – it’s a triple tax benefit!  Contribution limits increased in 2024 as follows:

  • Individuals – limits increased to $4,150
  • Families – limits increased to $8,300

Check out our blog from March for more details on HSAs.

Ok, let’s add a 6th

Please ensure your tax preparer coded your Backdoor Roth and/or Rollover from an old employer plan correctly!

We’re seeing an increasing number of these strategies executed properly but reported (or communicated to your tax preparer) incorrectly. These mistakes can be quite costly!

There are certainly more things to consider. Much of this depends on if you anticipate your income to fluctuate this year compared to last. It will also be interesting to see how the election impacts market volatility. If the we experience a pull back, the Roth conversion strategy will be more powerful this year. 

Let us know if you need assistance analyzing how our top 5 tax considerations (we mean 6!) impact you. Feel free to book some time with us here

Please consult with your financial advisor and/or tax professional to determine the suitability of these strategies. All views, expressions, and opinions in this communication are subject to change. This communication is not an offer or solicitation to buy, hold or sell any financial instrument or investment advisory services.