As the year draws to a close, it’s a crucial time to take advantage of tax-saving opportunities. December 31 marks the final day to make tax-deductible purchases, pay deductible expenses, contribute to charity, or pay tax-credit-qualifying tuition or expenses for 2024. Don’t let these valuable deductions slip away—plan ahead and act now to make the most of the remaining days.
Key Deadlines for Tax-Deductible Actions
With just days left in the year, here’s a quick reminder:
- December 31 is the deadline for making tax-deductible purchases, charitable contributions, or paying deductible expenses.
- Some businesses and organisations may close earlier for the holiday, so plan accordingly.
Let’s explore specific strategies you can use to reduce your tax liability and maximise savings.
College Tuition: Prepay for Tax Credits
If you have a child in college, check whether you’ve paid at least $4,000 in tuition and qualifying expenses for 2024. If not, consider prepaying for the first three months of the next year’s tuition. This payment can count towards your 2024 tuition credit. Before acting, consult with a tax professional to ensure this strategy aligns with your income level and tuition amount.
Small Business Expenses: Act Before Year-End
Small business owners can benefit from expensing business acquisitions made before December 31. Remember, the asset must be placed in service before it becomes deductible. Delayed delivery into the new year, even if paid for in 2024, won’t qualify for a deduction on your 2024 return. Plan purchases and deliveries carefully to capitalise on this opportunity.
Harvesting Capital Losses: Offset Gains
If you’ve had capital gains this year, consider reviewing your portfolio for underperforming assets. Selling these assets before December 31 can offset gains and potentially yield a net $3,000 deductible loss. Be sure to complete these transactions before the last trading day of the year to qualify.
Itemised Deductions: Unlock Additional Savings
Itemising deductions is only beneficial if your total exceeds the standard deduction for your filing status. For 2024, the standard deductions are:
If your itemised deductions are marginally higher than the standard deduction, “bunching” expenses into one year can help push your total over the threshold. Here are some last-minute opportunities:
Medical Expenses
Medical expenses are deductible only if they exceed 7.5% of your adjusted gross income (AGI). If you’re close to this threshold, consider paying for planned procedures, dental work, or prescriptions before year-end. Timing these payments strategically can help you maximise your deduction.
Property and State Taxes
Prepaying your home’s property taxes or the fourth instalment of estimated state taxes before December 31 can boost your deductions. However, note that the total deduction for this category is capped at $10,000.
Charitable Contributions
Charitable donations must be made to qualified organisations and are considered complete when delivered. For checks, this means the mailing date; for online transactions, it’s the date the financial institution processes the payment. If you’re short on cash, remember that credit card charges are deductible based on the date of the charge, not the payment.
Final Tax Preparation Tips
Taking these proactive steps now can significantly impact your tax return:
- Track Deadlines: Ensure all actions are completed by December 31 to qualify for 2024 deductions.
- Review Your Portfolio: Consult with your broker or financial advisor to identify opportunities for capital loss harvesting.
- Consult a Professional: Speak with a tax advisor to tailor these strategies to your unique financial situation and avoid potential pitfalls.
Your Trusted Tax Partner
As we approach the New Year, our team is here to help you navigate these year-end tax strategies and prepare for the upcoming tax season. Whether you need guidance on tuition credits, business expenses, or itemised deductions, we’re ready to assist you every step of the way.
Don’t wait until the last minute. Contact our office today to optimise your tax savings and start the New Year on the right financial footing. Wishing you a happy New Year and a prosperous 2025!
