We are now in the thick of tax season. You should have most of your documents. Now you’d better get them to your CPA so that they can meet the April 15th deadline. With that in mind, I have a few quick reminders for you today:
- 2024 IRA and Roth IRA contributions are due by April 15th. If you’re close to an income level limiting your contribution, it often makes sense to wait until you prepare your return to be sure you qualify. Just don’t forget to make the contribution.
- Qualified Charitable Distributions (QCDs) are a bit of mess when it comes to documentation. QCDs are a rapidly growing way to maximize your charitable giving by donating directly from your IRA. They count towards your required minimum distribution, but do not count as taxable income. The potential problem is the 1099R reports from the custodian do not specify that you made a QCD. You need to list it for your CPA to make sure you get credit for it. (Side note – We have software that tracks this and provide our clients with a statement showing all their QCDs.)
- Take the time to review your tax return when it’s complete. In fact, I’d love to help you do this. Reviewing how your taxes came out is the best way to see if any adjustments should be made for 2025. In addition to scanning for errors (we found at least two that required amended returns for 2023), we look for ways to achieve tax savings by smoothing out your income over your lifetime. That includes strategies to defer income in some years (IRA/HSA contributions, donor advised funds, QCDs) and recognizing income in other years (Roth conversions and/or IRA distributions). Taking a multi-year approach can produce serious savings over your lifetime.
- Remember that there are many proposals to change the tax code in 2025. We don’t know if they will be enacted for 2025 or 2026, but we are confident there will be some changes. A wait and see approach is a good idea for the first half of 2025.
About the Author: John O’Connor
John has more than ten years experience as an Investment Advisor. He focuses on devising and maintaining portfolios that meet individuals’ needs, investment research, and investment strategy. John has been recognized as a “FIVE STAR wealth manager” by Twin Cities Business Magazine 2016-2024. He is a CFA charterholder and CERTIFIED FINANCIAL PLANNER™ Professional.
Legal Disclaimer: These posts do not constitute an offer or recommendation to buy or sell any securities or instruments or to participate in any particular investment or trading strategy. They are for informational purposes only. CTW gathers its data from sources it considers reliable. However, CTW makes no express or implied warranties regarding the accuracy of this information or any opinions expressed by the author and may update or change them without prior notification.