As the new year approaches, people are often preoccupied with festive thoughts like family gatherings and resolutions. However, taxes should also be on your mind. Even though tax filing deadlines aren’t until April, taxes are calculated based on activities from January 1 to December 31 of this year.
To make life easier come tax time, consider the following three popular moves:
Boosting your 401(k) contribution is a great way to reduce your taxable income. Contributions made between now and December 31 can be sheltered from income tax, allowing you to deduct up to $23,000 in a traditional plan or an additional $7,500 if you’re 50 or older.
Another strategy is harvesting losses on investments that didn’t perform well this year. If you sell these assets at a loss, you can use the loss to offset gains and income. However, be cautious not to sell losing investments just for the tax benefit.
Lastly, take advantage of tax credits for certain purchases, such as energy-efficient home improvements or buying an electric vehicle. These credits can provide up to 30% of qualified expenses for home upgrades or $7,500 for new EVs and $4,000 for used ones.
Remember, tax strategies should align with your financial goals and not just the tax benefits.
Source: https://www.cnbc.com/2024/12/27/year-end-moves-to-lower-tax-bill.html