Tax-Saving Opportunities You Can’t Miss Before Year-End!

As another year is ending and tax season is just around the corner, we would like to share the following information and a list of tax tips to help you with year-end tax planning.

Individual Tax Planning

• Retirement Accounts – Consider investing in an IRA. You have until April 15, 2025, to make the contribution. The limit for 2024 is $7,000 with an additional $1,000 allowed for taxpayers 50 years of age or over by 12/31/2024. If your income is too high to make a Roth IRA contribution, you may consider making a non-deductible Traditional IRA contribution and using the “back door” conversion rules to get money into your Roth IRA. This might also be the year to consider Roth conversions due to the lower tax brackets and the possibility of lower incomes. 
  
• Required Minimum Distributions (RMD) – If you turn age 73 by 12/31/2024 you are required to start taking RMDs. You have until April 1, 2025, to take your RMD but if you do that you will have to take two RMDs in one year which will push up your taxable income that year. You can also now continue to contribute to your IRA at any age if you still have earned income. Another strategy to consider is giving to charity directly from your IRA (if over the age of 70 1/2) which will lower your income when you are not able to itemize. For 2024 you can transfer up to $105,000 from your IRA directly to charity.
• Charitable Giving – The limit for charitable donations is 60% of income. Be sure to retain documentation for all contributions. (The 60% limitation does not apply to IRA charitable contributions.)
  
• Health Savings Account – The limit for 2024 is $4,150 for an individual and $8,300 for a family.  An additional $1,000 is allowed for taxpayers 55 or older by 12/31/2024. Look at maximizing the contributions if you have not done so. 
  
• Green Energy – If considering home improvements, there are two green energy tax credits that are available:   
  • The residential clean-energy property credit is equal to 30% of the cost of solar panels, solar-powered water heaters, geothermal heat pumps, and more. 
  • The smaller energy-efficient home improvement credit is for insulation, boilers, central air conditioners, water heaters, exterior doors, heat pumps, windows, and the like that meet energy-efficient standards. The basic credit is 30% of the cost and installation of these improvements. There are dollar limits for the specific improvements and there is a $1,200 aggregate yearly limit. 
    
• Gifting – The 2024 gift tax exclusion is $18,000 per individual. Remember that you do not get a tax deduction for the gift, but it could help with estate taxes in the future. 
  
• 529 Plans – You can contribute up to $90,000 per beneficiary this year ($180,000 if married). If you put in the maximum, it will be treated as gifting $18,000 ($36,000) a year to the beneficiary from years 2024 through 2028.

Business Tax Planning

•  Bonus Depreciation – Firms can deduct 60% of the cost of new or used qualifying business assets, with lives of 20 years or less, that they buy and place in service by 12/31/2024. 
• Business Vehicles – With bonus depreciation the first-year cap is $20,400; absent bonus depreciation the first-year cap is $12,400.
• Heavy SUVs – You can expense up to $30,500 of the cost. 60% of the balance gets bonus depreciation, and the rest may qualify for regular five-year depreciation. 
• Big Pickup Trucks – You can expense up to 100% of the cost used in business, subject to the rule that total expensing can’t exceed taxable income from the business. 
• Section 179 – The Section 179 deduction limit for 2024 is $1,220,000. This means U.S. Companies can deduct the full purchase price of ALL qualified equipment purchases, up to the limit, subject to additional purchase thresholds. 

Looking ahead to After 2024

Many of the provisions of the 2017 Tax Cuts and Jobs Act are slated to expire at the end of 2025, including the following: Lower individual income tax rates, larger child tax credit, higher standard deductions, the $10,000 limitation on deducting state and local income taxes, and the larger lifetime estate and gift tax exemption. Trump is looking to make these 2017 tax cuts permanent with even lower rates, hiking the child tax credit, dropping the corporate rate to 15% for many C corps, imposing across-the-board tariffs on imported goods, and ending green-energy breaks. We will wait to see what actually happens.

BOI Reporting

Starting in 2024, corporations, limited liability companies (LLCs), limited partnerships, and other entities that filed corporate formation papers with a state’s Secretary of State’s office or similar government agency must now also file a mandatory report with the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN). A reporting company created or registered to do business before January 1, 2024, will have until January 1, 2025, to file its initial beneficial ownership report (BOI Report). A reporting company created or registered on or after January 1, 2024, will have 90 calendar days to file its initial beneficial ownership report.

Note: A Texas federal court issued a preliminary injunction blocking enforcement of the Corporate Transparency Act which requires certain businesses to file a BOI report. We are monitoring that situation to see what guidance is issued.

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Contact Gift CPAs for more information on our full scope of accounting and business services. We have years of experience working with small businesses to help with bookkeeping, taxes, and other business needs. Make an appointment to meet virtually or at one of our five locations in Harrisburg, Mechanicsburg, Myerstown, Ephrata or Lancaster!