Does winter have you stuck inside, mainlining Sleepytime tea? Consider getting a head start on your tax planning. It’s a great time to plan ahead. Right now, many of my clients are asking about the best ways to reduce taxes for high-income earners.
You still have some ways to save on taxes for 2023, and it’s never too early to plan ahead for 2024. With a little planning, you could save a bundle AND have more time in April to enjoy spring weather.
Here are some of the best ways to reduce taxes for high-income earners in 2024.
Way #1: Contribute to an IRA or Retirement Accounts
As you may know, IRA contributions reduce your taxable income dollar-for-dollar.
But many clients are surprised to learn they can make an IRA contribution for 2023 as late as their tax filing deadline in 2024. If only one spouse is working, she or he can make a contribution for the non-working spouse to maximize deductions.
Do you have a retirement plan at work? If you got a raise, plan ahead and bump up your contributions.
Way #2: Contribute to a Health Savings Account
Do you have a health plan with a high deductible? If you can afford to maximize your HSA contributions each year, do it. Just like IRA contributions, you have until your tax filing deadline to contribute for last year. The long-term tax benefits can be substantial.
Way #3: Claim Capital Losses
Are you considering selling an investment property, a business asset, or an investment but you’re worried about the taxes? You may be able to harvest losses elsewhere to offset and reduce the tax hit. If done properly, this can turn temporary investment declines into real tax losses, but keep your investments aligned for long-term growth.
Way #4: Maximize your Deductions
It’s vital to communicate with your tax preparer if you have big changes: Family changes, medical expenses, education costs, or business ownership changes are the most common.
If you’re charitably inclined, an advisor can ensure you get the most tax bang for your charitable buck. This is true whether you’re retired or still working and earning a high income.
And if you own a business, well-timed financial planning can save you money now and later when you exit.
Without careful planning, tax bills might be bigger than necessary. Make the most of gray winter days and get a jump on your tax planning! You can schedule a conversation here to talk to an advisor who can help you take advantage of the best ways to reduce taxes for high-income earners in 2024.
About the Author
Clinton Miller, CFP®, is an investment advisor & financial planner with an educational background in mathematics. He enjoys making tax planning relevant for clients so they can make confident money decisions.
He and his wife Aubrey are based in Canton, OH & have two sons. In his spare time, he enjoys fishing, chainsaw repair, & mucking around in the woods.
