7 Year-End Money Moves to Cut Your 2024 Tax Bill

That’s a high threshold. Among the circumstances that could tilt the equation in favor of itemizing: if you live in a federally declared disaster area and suffered substantial damage to your property that wasn’t covered by insurance during one of this year’s many climate-related catastrophes, or if you had health problems that resulted in high out-of-pocket medical bills, itemizing your taxes might make sense.

If you’re close to the threshold, try to pump up deductible expenses in what’s left of the year, suggests Kevin Martin, manager at The Tax Institute at H&R Block. For example, you might prepay next year’s first-quarter property taxes, be especially generous with charitable donations this holiday giving season or schedule an eye exam or physical therapy sessions to push your unreimbursed medical bills past 7.5 percent of your adjusted gross income, after which they become deductible.

Not close? Take the opposite approach, shifting as many potentially deductible expenses as possible into 2025, to help meet the threshold for itemizing next year. In particular, Welch suggests holding off on paying those first-quarter property taxes until January, since there’s some post-election buzz that the current $10,000 cap on deducting them might be raised.

“If the limit is raised in 2025, you win the lottery and get the higher deduction,” says Welch. “If it isn’t, there’s no real difference to you except that you got to hold onto your money for another 15 days or so.”

4. Minimize taxes on stock-market profits

After this year’s run-up in stock prices, you may be facing a big tax bill on investments you sold in taxable accounts. Even if you didn’t cash in any winners in 2024, you could still owe taxes on profitable mutual funds in these accounts, since managers are required to pass along any gains they’ve realized to shareholders at least once a year.

Consider selling a losing investment or two to offset gains, suggests Ryan Morrissey, a wealth advisor with Morrissey Wealth Management in North Haven, Connecticut. You can use up to $3,000 in losses a year, and if you have more losses than gains, you can use the excess to offset regular income. You can also carry over losses above the annual limit to lower taxes in future years.

“Even though the market is up around 25 percent so far in 2024, there are definitely stocks out there that are not having a good year,” Morrissey says.

Depending on your income, you might also consider selling a few winners to take advantage of the current zero-percent capital gains rate in certain tax brackets. To qualify, you need to have owned the investment at least a year and, if you are married, have taxable income of $94,050 or less ($47,025 for singles) — that’s after subtracting the standard deduction and other adjustments to income, like 401(k) contributions.

“You can make a fair amount, into the low six figures before adjustments, and still pay no tax on long-term gains,” says Morrissey, host of the podcast Retire with Ryan.

Still want to own these strong-performing stocks? You can simply buy the shares right back; there are no wash rules stopping you as there are for losing investments. Bonus: Future gains will be calculated based on the new, higher purchase price, further reducing the tax bite.

5. Shift some pre-tax savings to a Roth IRA

If you think your tax rate now is likely lower than it will be in the future — which may be the case if you’re winding down your career or in the early years of retirement before RMDs kick in — consider shifting a portion of the money you’ve saved in pre-tax accounts, like 401(k)s and traditional IRAs, into a Roth IRA. 

“Given that we’re in a historically low-rate tax environment now, this strategy can make a lot of sense,” says Snyder. Money in a Roth IRA grows tax-free, and you won’t owe taxes on money that you take out of the account in retirement. And, since the withdrawals don’t count as income, you could land in a lower tax bracket.

Also, your heirs may thank you. Unlike traditional 401(k)s and IRAs, Roth IRAs don’t have RMDs, potentially leaving more money in the account for an inheritance. Beneficiaries aren’t required to make withdrawals either, and when they do tap the account, they won’t owe taxes on the money. “If you’re looking to create a legacy for, say, your kids, the tax-free benefits of a Roth are a great gift,” says Morrissey.

The catch: You have to complete the conversion by Dec. 31 and pay taxes on the amount you’re withdrawing from your pre-tax account now. So you need to determine if you can afford a larger tax bill now to save more on taxes later.

6. Grab a state tax break

Want to set aside money to help pay for your child or grandchild’s college education and cut your state income taxes at the same time? Although they’re not deductible at the federal level, 34 states offer a tax break on contributions to a qualified 529 college-savings plan, for amounts ranging from a few hundred dollars to as much as $30,000.

In all but a handful of these states, the contribution deadline to qualify for the credit or deduction is Dec. 31.

Contributing on behalf of a grandchild? Your best bet is to open a separate 529 account rather than gifting money to a parent’s plan. That’s because, starting this year, grandparent-owned 529s are no longer counted in financial aid calculations, so your generosity won’t jeopardize how much assistance Junior is awarded.

7. Embrace the giving spirit

While the 2017 changes in tax law have made it harder to deduct donations to charities, you may still be able to catch a break for contributions to nonprofits.

Considering the stock market’s rally this year, you might want to donate shares that have appreciated sharply directly to a charity. As long as you’ve owned the investment for at least a year, you’ll avoid paying capital gains taxes. And, depending on how much you give and your other deductible expenses, you may be able to write off the gift.

If you’re 70½ or older, you can transfer funds directly from a retirement plan to a charity of your choice through what’s called a qualified charitable distribution — say, to satisfy an RMD. You won’t get a deduction for the donation but the amount you transfer will not be counted as income, which can lower your overall tax bill.

Once you’ve finished your tax moves for 2024, spare a few more moments for tax planning for 2025, especially if you’ll be hitting a milestone birthday such as 50, 65 or 73 — when you may qualify for special credits, higher contribution or deduction levels, or be subject to new requirements.

“Being proactive tax-wise at the end of the year, looking ahead as well as back, can really pay off in the long run,” Martin says.

Visit AARP Foundation Tax-Aide to learn more about free tax prep services by 30,000 volunteers nationwide.