This year, April 15th is the deadline to file your 2024 tax return, and it is quickly approaching.
Whether you work with a CPA or another trusted tax preparer — or you're trying to tackle it yourself using TurboTax or some other software — you're probably in the thick of collecting forms and information as the deadline nears. You may even feel like you're not able to do much at this stage in the game to impact your liability for last year.
If you're still finishing up your 2024 return, here are four tax tips for high earners that you should have on your radar. Consider the following strategies to determine if they make sense for your specific financial situation.
Our first tip concerns taking advantage of the retroactive contribution rules for a health savings account (HSA).
In most cases, you're eligible for an HSA by virtue of having a high-deductible insurance plan. Whether or not you maxed out your contribution to it last year, you can do so now. More clearly stated, if you did not max out last year, you can still make a catch-up or retroactive contribution for last year now.
That means, for example, if you are married with children, you can contribute up to $8,300, or if you have self-only coverage, you can contribute $4,150 toward a health savings account (for 2024) and reduce that from your taxable income.
The HSA contribution limits for 2025 are:
Our second tip is to make full use of retroactive contributions to specific retirement accounts. Note that we're not referring to your retirement accounts through your work or employer but a Traditional IRA or Roth IRA.
Like a health savings account, both a Traditional IRA and a Roth IRA can be funded retroactively. This means you can contribute $7,000 for the last year. Those 50 or older can contribute an additional $1,000 to reach $8,000 for 2024.
If you have any self-employed earnings for 2024, you can make a retroactive deductible contribution to a Self-Employed Pension (SEP) IRA. A SEP IRA is a retirement vehicle for folks who have self-employed income, and the contribution amount is generally about 20% of that self-employed income.
You will want to check with your CPA or tax software for the exact specifications, but the bottom line is those contributions can be made retroactively, and they reduce the amount of your taxable income.
Employer-sponsored 401(k), 403(b), or 457(b) plans are a wonderful way to minimize your year-end tax exposure and increase your savings for retirement. Contributions to these employer-sponsored plans are made on a per-paycheck basis and may even enable you to receive additional matching contributions from your employer.
Pre-tax contributions to these plans will lower the income you have to pay taxes on, ultimately reducing your tax exposure. The individual contribution limit for 2024 is $23,000.
The Tax Cuts and Jobs Act (TCJA) tax overhaul took away many strategies taxpayers could use to ramp up their itemized deductions for 2018 through 2025. However, filers who plan their charitable giving may be able to get themselves over the new standard deduction and itemize if they use a strategy called "bunching."
The charitable giving deduction remains for taxpayers who itemize. Under the TCJA law, this break is limited to 60% of adjusted gross income for cash gifts, but you can carry forward by up to five years any amount that exceeds that.
Single donors who fall short of the $14,600 threshold ($29,200 if married) can itemize on their tax returns if they "supercharge" their giving in one year.
Consider a married couple claiming the maximum property and state income tax deduction of $10,000, and this couple also paid $6,000 in mortgage interest in a year. They will need at least $13,200 of charitable gifts to hit the $29,200 standard deduction threshold.
If this couple normally gives $8,000 to charity annually, they can accelerate their gifts by cramming two years of donations into one tax year. This way, they can itemize their deductions ($32,000) on their tax return in one year and take the standard deduction ($29,200) the next.
There may be a more advantageous strategy than donating cash. If you own appreciated stock or mutual funds, consider donating the appreciated assets from your portfolio rather than cash from your bank account.
The tax deduction for appreciated stocks or mutual funds is equal to the market value of the asset upon the donation (if the asset is owned for more than 12 months). This allows you to:
Our final tip is simple: Make sure that you have gathered all the necessary tax forms from your financial institutions. Investment accounts, retirement accounts, stock accounts, and mutual funds — every one of those is going to generate a tax form for you, and you must have all of those forms and pass them on to your CPA.
One of the top reasons why people receive a communication from the IRS six months or so after filing their taxes is not that they have done something wrong but that they didn't turn in one of those forms to their CPA while filing their taxes.
All of those financial institutions report to the IRS, and if you do not supply all of the tax documents you receive to your accountant, they don't know to put the information on your tax return. That, in turn, makes the IRS look at the difference and send you a letter pointing out that you are missing pertinent financial information on your taxes.
Finally, if you own a business, medical practice, or dental practice, there are likely opportunities for you to take advantage of. A more technical explanation is better suited through a thoughtful conversation with your tax preparer or CPA.
Understanding tax requirements and managing your tax bill should be a part of any financial plan. Some taxes can be deferred, and others can be managed through tax-efficient strategies. With careful and consistent preparation, you may be able to manage the impact of taxes on your financial efforts.
If you're in doubt, or if tax season reminds you that you need to bring some organization to your finances, reach out to our team at Spaugh Dameron Tenny. We're always happy to connect with you to see how we can assist you on your financial journey.
Any discussion of taxes is for general information purposes only, does not purport to be complete or cover every situation, and should not be construed as legal, tax, or accounting advice. Clients should confer with their qualified legal, tax, and accounting advisors as appropriate.
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Shane Tenny, CFP®, is Managing Partner of Spaugh Dameron Tenny, where he helps high-net-worth individuals and families navigate complex financial decisions with clarity, structure, and confidence. Since joining the firm in 2000, Shane has worked with clients through major financial transitions, including career changes, liquidity events, retirement, and multigenerational planning. His approach combines comprehensive financial planning with a focus on behavioral finance, including advanced studies in Behavioral Economics through the University of Chicago Booth School of Business. Shane is the author of Your Next Million, former host of the Prosperous Doc® Podcast, and a nationally recognized financial advisor, speaker, and educator.
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