Only 12 Days Left for 2024 Tax Deductions
Article Highlights:
You can still take action to reduce your 2024 tax bill.
Such actions must be completed before the end of 2024.
Deductible expenses paid by credit card are deductible in the year they are charged.
College Tuition
Business Expenses
Harvest Last Minute Losses
Itemized Deductions
As the end of the year is getting close, this is a reminder that New Year’s Eve, December 31, is the last day that you can make a tax-deductible purchase, pay a tax-deductible expense, make a tax-deductible charitable contribution, or pay tax-credit-qualifying tuition or expenses for 2024.
That date is only 12 days away. Although many businesses, charitable organizations and government offices will be closed for the New Year’s holiday, you still have time before then to make charitable contributions and pay deductible taxes. Don’t be surprised, though, if some establishments close down sooner than the 31st to take a long weekend, meaning your time to take action may be even shorter.
College Tuition - If you have a child in college, you can also check to see if you have paid at least $4,000 in tuition and qualifying expenses for that student during 2024. If not, you are permitted to prepay for the first 3 months of the next year’s tuition and count that payment toward your 2024 tuition credit. However, before you do that, please call this office to make sure that this strategy is beneficial for you based upon the tuition amount and your income level.
Business Expenses - If you own a small business and make a business acquisition before the end of the year, you can generally expense (write off) the entire cost. However, business acquisitions must be placed in service before their expenses are deductible. Thus, do not expect a deduction on your 2024 return if you take delivery after the end of the year—even if you paid for the item in 2024.
Harvest Last Minute Losses - If you have an overall capital gain for the year so far, you can check with your broker or conduct your own review of your portfolio to find losers that you could sell before the year ends to offset your gains; you could even come up with a net $3,000 loss that could be tax-deductible. Of course, these transactions will need to be completed before the last trading day of the year.
Itemized Deductions – To benefit from claiming itemized deductions, they must exceed the standard deduction for your filing status.
2024 STANDARD DEDUCTIONS | ||||
Filing Status | Married Filing Joint & Surviving | Head of Household | Single | Married Filing Separate |
2024 | $29,200 | $21,900 | $14,600 | $14,600 |
Itemized deductions are divided into 5 categories of expenses: medical, taxes, interest, charitable contributions, and miscellaneous, some of which provide last minute deduction opportunities. If your itemized deductions are only marginally higher than the standard deduction, bunching can help push them further over the threshold, making itemizing more beneficial.
Last-minute Medical Expenses - Paying last-minute medical expenses can be a strategic move to increase your itemized deductions, especially if you are close to surpassing the standard deduction threshold. This strategy, often referred to as "bunching," involves timing your medical payments to maximize deductions in a particular tax year.
For medical expenses to be deductible, they must exceed 7.5% of your adjusted gross income (AGI). This means that only the portion of your medical expenses that is above this 7.5% threshold is deductible. Therefore, it's crucial to calculate your AGI and determine how much your medical expenses need to be to surpass this floor. If you anticipate having significant medical expenses, paying them within the same tax year can help you exceed this threshold and maximize your deductions.
For example, if you have planned medical procedures or expenses, such as dental work or prescription purchases, you might consider accelerating these payments into the current tax year. This can be particularly advantageous if you expect your income to be higher in the following year, which would raise the 7.5% threshold relative to your income.
However, it's important to weigh the benefits of this strategy against your cash flow and financial situation.
Taxes - It might be beneficial for you to prepay, before the year ends, the upcoming installment of your home’s property taxes. If you are paying estimated state taxes, you can also pay your 4th quarter installment before the end of the year. CAUTION: This tax category of deductions is limited to $10,000.
Charitable Contributions - Charitable contributions to qualified organizations are considered to have been made at the time of its unconditional delivery; for donations made by check, this is the date that the check is mailed. If you use a pay-by-phone or online account, the date when the financial institution pays the amount is the date when you made the contribution.
If you are short on cash, keep in mind that purchases or contributions charged to your credit card are deemed to be purchased when the charge is made.
If you have questions, contact our office. We wish you a happy New Year and look forward to assisting you with your tax-preparation needs during the coming tax season!
Sign up for our newsletter.
Each month, we will send you a roundup of our latest blog content covering the tax and accounting tips & insights you need to know.
We care about the protection of your data.
Get in Touch with Morrison, Gilmour, Polak & Hillard, P.C
You can count on us for professional, timely and reliable tax and accounting services. If you’re ready to get started, just fill out this form and we’ll be in touch.