The 2024 Tax Season Has Arrived

We thought we would help out by sharing our top 5 tips that can save you money:

1. Max Out on Your Retirement Plan(s)

• Max out your contributions to your 401(k), IRA, or other qualified retirement plan to reach the maximum contribution amount.
• This increases your retirement savings while potentially lowering your taxable income.
• For 2025, the IRS raised the 401(k) contribution limit to $23,500, while the IRA contribution limit remains at $7,000.
• You may still be able to max out for tax year 2024 as long as it is before the April 15th tax filing deadline.
• Be sure to consult your financial advisor to ensure you’ve done all you can for 2024.

2. Keep Track of Where You’ve Worked Remotely Out-of-State (or Country)

• Many workers now work remotely, but different states have varying residency definitions.
• A state may consider you a resident for tax purposes if you work there for 183 days or more.
• Track your days spent working in different locations and consult with us regarding the latest rules in:
  • Where you live
  • Where you work remotely
  • Where your business is located

3. Cover Healthcare Costs Efficiently

• Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs) allow tax-deductible or pretax contributions for medical expenses.
• Key differences between these accounts:
  • HSA: Requires a high-deductible health plan (HDHP) and does not require funds to be spent yearly.
  • FSA: Funds must be spent within the plan year, but some employers allow a rollover up to $660 or a 2½-month grace period.
• Important tax benefits:
  • HSA contributions can be made up to the tax filing deadline (e.g., April 15, 2025 for 2024 contributions).
  • Check if your employer allows reimbursements for out-of-pocket medical expenses.

4. Look for Tax-Efficient Investment Strategies

• Consider tax-efficient investment products, such as tax-free municipal bonds.
• If your modified adjusted gross income (MAGI) is at least $200,000, you may be subject to:
  • 3.8% Net Investment Income Tax (NIIT)
  • This applies to either your net investment income or the amount exceeding the $200,000 threshold (whichever is less).
• Consult with your financial advisor to explore exemptions and tax-efficient strategies.

5. Review Your Estate and Gifting Plans

• The Tax Cuts and Jobs Act (TCJA) of 2017 established higher federal gift and estate tax exemptions, but these will expire in 2026:
  • Current individual exemption: $12.92 million
  • Current couples exemption: $25.84 million
  • Will drop to $5 million (individuals) and $10 million (couples) (adjusted for inflation).
• This could expose more individuals to gift and estate taxes starting in 2026.
• You may want to move assets out of your estate through gifts before exemption changes.

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If there’s anything we can do to support your tax or financial needs, don’t hesitate to reach out.
We’re here to help!

Your Jacobson Lawrence Team