End-of-year Tax Planning
We’re in the month of December, which means that while a lot of people are thinking about holiday parties and Christmas shopping, some are also thinking about taxes.
With the end of 2024 quickly approaching, there’s not much time left in this tax year.
Tommy Lucas is a Financial Advisor at Moisand Fitzgerald Tamayo, LLC in Orlando.
He said there are a few things Central Florida taxpayers should know to set themselves up for success during the 2024 tax filing season.
“Planning is key, and with taxes, taxes are not an April 15 thing. When it gets to that point, the score is the score,” he said. “At this point, we can still control to a certain extent, what the score is or what we're going to do about that score.”
Once the year ends, Lucas said there’s not much you can do to affect your tax liability for this year.
He stresses the importance of getting your documents in order in December to avoid any surprises when filing in the new year.
“Take a look at your withholding so far this year. Compare it to what you did last year in 2023 (and) make sure everything seems right, that there's not necessarily going to be any surprises that are coming up,” he said.
One common mistake Lucas sees often is individuals not withholding the right amount of taxes from their paychecks.
“If that's the case, then you probably need to make an estimated payment to catch up on that withholding and make sure that there's no, what we call, underpayment penalties, which can happen if you don't pay in enough to avoid this penalty,” he said.
Hurricanes in 2024 could bring savings in 2025
Due to the devastating hurricanes that hit Florida this year, specifically Hurricane Milton, the IRS has extended the deadline to May 1, 2025 for Floridians to file their taxes.
“The entire state of Florida is considered to be in what’s called a qualified disaster loss area. And when the IRS declares that, there are multiple things that are now unlocked for taxpayers in the state of Florida to take advantage of for tax purposes,” said Lucas.
Individuals and businesses in the federally declared disaster may be eligible for a Casualty Loss Tax Deduction, which is available for damaged or destroyed property not covered by insurance.
Lucas said that’s in addition to your standard deduction, which is $14,600 for individuals, and $29,200 for married couples.
“There's rules about that and how that works, but this is something that typically is not available unless the IRS declares it. In this case, they have,” he said.
In addition to the available deduction, Lucas said there’s also good news if you had to take a distribution from your 401k or retirement plan and you’re younger than 59.
“You're allowed to actually pull up to $22,000 out of your 401k, and if you're under 59.5 (years old), you don't have to worry about that 10% early withdrawal penalty,” he said.
Lucas said that will help Floridians access funds or take deductions not typically available to them.
End of 2024 Financial Tips
With less than 30 days left in 2024, Lucas said there’s still a few things you can do to try and lower your income tax.
“Try to get more into your 401k. That's the easiest option at this point. Now, you're not going to have a lot of paychecks left, but that's the easiest and simplest way to do that,” he said.
Lucas adds to look at your Health Savings Account, and if it’s not already, do it through your employer for additional payroll tax deductions.
“And then at this point, if you have losses, go ahead and harvest those losses. You can take up to a $3,000 deduction if your losses exceed your gains by at least $3,000 and that can go against income from your wages.”
Lucas stresses planning through the holiday season, so gift giving doesn’t hinder your ability to pay if you owe the IRS in the new year.
“Knowing what your income tax liability is going to be, and how you're going to address it, especially going into the holiday season, when we're going to be bombarded with, wanting to make sure everyone's taken care of and getting gifts. And what's my budget for that and everything ultimately comes to that overall financial picture,” he said.
Lucas said he’s seen too many clients surprised come tax season.
“We're doing their tax return, we have no idea what's going to happen, and turns out they owe several thousand dollars and it's a shock, and nobody likes that,” he said. “So getting it known out of the way now is definitely the way to go.”
