As the end of the year approaches, it’s an ideal time to review your financial situation and explore strategies to maximize your tax benefits. For New York residents, this process involves both federal and state considerations. Here’s a guide to help you make the most of your tax benefits before the calendar turns.
1. Accelerate Deductions and Expenses
One effective way to reduce your taxable income is to accelerate deductions and expenses. For instance, if you’re able to prepay deductible expenses such as property taxes, medical bills, or charitable donations before December 31, you can claim them for the current tax year. This is particularly useful if you anticipate being in a higher tax bracket this year or if you itemize deductions.
2. Contribute to Retirement Accounts
Contributing to retirement accounts can provide significant tax benefits. In New York, contributions to a traditional IRA or 401(k) can be deducted from your federal taxable income, reducing your overall tax liability. For 2024, you can contribute up to $6,500 to an IRA ($7,500 if you’re age 50 or older) and up to $22,500 to a 401(k) ($30,000 if you’re 50 or older). Ensure you maximize these contributions before the end of the year to benefit from the deduction.
3. Review State-Specific Tax Credits and Deductions
New York offers a range of state-specific tax credits and deductions that can lower your state tax liability. For example, you may be eligible for credits related to property taxes, college tuition, or home energy improvements. Review the New York State Department of Taxation and Finance website to ensure you’re taking advantage of all available credits and deductions.
4. Consider Charitable Contributions
Donating to charity not only supports worthy causes but also provides a potential tax deduction. Ensure that any charitable contributions you make are to qualified organizations and keep detailed records of your donations. For those who are 70½ or older, consider making a Qualified Charitable Distribution (QCD) from your IRA. This strategy allows you to donate up to $100,000 directly from your IRA to a charity, which can be excluded from your taxable income.
5. Optimize Capital Gains and Losses
If you have investments in taxable accounts, it’s a good time to review your capital gains and losses. Consider selling underperforming investments to realize losses that can offset gains from other investments, a strategy known as tax-loss harvesting. This can reduce your taxable income and help manage your tax liability for the year.
6. Utilize Flexible Spending Accounts (FSAs)
If you participate in an FSA through your employer, review your balance to ensure you use up any remaining funds before the end of the year. FSAs often have a “use-it-or-lose-it” rule, so spending down your balance on eligible medical or dependent care expenses can prevent forfeiture of your funds.
7. Plan for Future Tax Changes
Keep an eye on potential tax law changes that could impact your financial strategy. New York State tax laws or federal regulations could change, affecting your tax benefits. Staying informed and consulting with a tax professional can help you adjust your strategies accordingly.
We Can Help You Maximize Your New York State Tax Benefits
Maximizing your tax benefits before the year-end requires proactive planning and careful consideration of your financial situation. By accelerating deductions, contributing to retirement accounts, leveraging state-specific credits, and managing investments, you can optimize your tax outcomes. The professionals at DeSantis, Kiefer, Shall, & Sarcone can provide personalized advice tailored to your specific needs and help you navigate the complexities of tax planning so you can get the most out of your 2024 tax benefits.
