5 Tax-Planning Checks That Could Save You Cash
When tax time approaches each year, you probably start loading everything into your tax preparation software or send documents to your CPA. Many of these tax documents are mailed to you or may be available online, but what about some of the items that are tougher to keep track of? Here are five tax strategies that are often missed or not reported—and they could be keeping money out of your pocket.
1. 529 contributions/distributions
Other than your year-end statement, you may not receive any documentation to send to your accountant that specifically outlines the amount you contributed to 529 plans over the past year. Be sure to track down this important information and pass it along to your accountant to confirm that you’ll receive the appropriate deduction on your state income tax return.
2. Qualified charitable distributions
If you are 70 ½ years or older, you may have contributed to a qualified charity directly from your IRA, which is crucial information for your CPA to have. Custodians do not track where IRA distributions go, so your 1099-R tax form will likely show the total distribution as “taxable.” If you don’t inform your CPA that part of this distribution went to a registered charity or other qualifying nonprofit organization, you may be taxed on the total distribution.
3. Charitable contributions
If you made gifts of cash, appreciated securities or other property to qualified charitable organizations during the year, you will likely receive a letter from the organization documenting your financial gift. Be sure to pass along this information to your CPA, as these donations are not captured on an IRS form.
4. IRA contribution deduction
As a general rule, you’re allowed to make an IRA contribution for the prior year up to the tax filing deadline of the subsequent year. This date is usually April 15, but if it falls on a weekend, you have until the next business day. In certain cases, you may qualify for this contribution to be tax-deductible. If you—and your spouse, if married—are not covered by an employer-sponsored retirement plan, you can deduct the full contribution to your traditional IRA no matter how much you earn. However, you’re limited in the amount you may deduct. For instance, for the 2024 tax year, the maximum allowable deduction per person is $7,000. Individuals 50 and older can put in an additional $1,000 as a “catch-up” contribution.
5. Health Savings Account contribution deduction
Like the IRA deduction noted above, you have until tax deadline day to make a deductible contribution to your Health Savings Account (HSA) for the previous tax year. However, being able to contribute requires that your health plan be HSA-qualified. Be sure to confirm with your HSA custodian that any contributions you make after the year-end that you want to apply on your tax return are coded as a “prior year” contribution.
We hope these five tax-planning checks will help you send complete and appropriate documentation to your CPA, providing you with viable options to maximize your income tax savings.
ABOUT THE AUTHORS
Josh Larson
Josh is an Associate Partner, Wealth Advisor based in our Itasca, IL, office. He counsels clients with unique and complex situations requiring advanced planning solutions tailored to optimize the objectives they value most. He earned his degree at Aurora University studying Accounting and Business & Commerce. Josh is a CERTIFIED FINANCIAL PLANNER™ professional.
Neil Teubel
Neil is a Partner and Head of Wealth Planning at Corient. He oversees the entire team of planning experts across the country. He designs and manages the firm’s wealth planning vision and strategy with the goal of ensuring clients receive comprehensive expertise and have a unique experience. Neil believes in the critical importance of having an integrated wealth experience and finds it rewarding to help clients navigate the complexities of wealth to achieve their goals. Prior to Corient, Neil’s experience includes positions with legacy firm Balasa Diverno Foltz (BDF). He holds bachelor’s and master’s degrees in financial planning and is a CERTIFIED FINANCIAL PLANNER® professional. Neil and his wife, Jenny, have three young kids and when he’s not in the office, you can find him golfing, hiking, renovating houses, or running after Sienna, Cole and Ford.
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