Connect with us

Personal Finance

You can still reduce your 2024 taxes with these strategies

Published

on

Westend61 | Westend61 | Getty Images

There’s still time to lower your taxes or boost your refund for 2024, financial experts say.

Typically, there’s a refund when you overpay taxes during the year via withholdings or estimated payments. You can expect a tax bill when you don’t pay enough.

Since the Tax Cuts and Jobs Act of 2017, or TCJA, there are fewer ways to reduce your taxes, said certified financial planner and enrolled agent Tricia Rosen, founder of Access Financial Planning in Newburyport, Massachusetts.

More from Personal Finance:
Here’s how to leverage higher income limits for the 0% capital gains bracket
Parents are saving more for college thanks to a key change to 529 plans
Do I have enough money to retire? Ask yourself 3 questions to tell if you’re ready

When filing taxes, you take the standard deduction or total itemized tax breaks, whichever is larger.

Enacted by former President Donald Trump, the TCJA doubled the standard deduction, which means fewer people claim itemized tax breaks for charitable gifts, medical expenses or state and local taxes.

“It’s tough to get over the standard deduction, especially if you’re married,” Rosen said. For 2024, the standard deduction is $29,200 for married couples filing jointly and $14,600 for single filers.

However, there are some year-end tax planning strategies to consider, experts say. 

Boost pre-tax 401(k) contributions

There’s still time to increase your pretax 401(k) contributions for 2024, which reduces your adjusted gross income, Rosen said.

Pre-tax deferrals provide an upfront tax break, but you’ll pay regular income taxes on withdrawals in retirement.

For 2024, employees can defer up to $23,000 into 401(k) plans, up from $22,500 in 2023. Workers age 50 and older can save an extra $7,500 for catch-up contributions.

Increase paycheck withholdings

If you’re expecting a tax bill, you can increase paycheck withholdings or make payments to the IRS, according to Tommy Lucas, a CFP and enrolled agent at Moisand Fitzgerald Tamayo in Orlando, Florida.

Often, taxpayers make withholding elections once via Form W-4, but “there’s a whole slew of things that can change,” such as second jobs, marriage, divorce or birth of a child that may impact your situation, Lucas previously told CNBC

'Hidden' benefits of HSAs: Here's what to know

Consider ‘bunching deductions’ 

As year-end approaches, you can tally your itemized deductions to see if you’re close to exceeding the standard deduction, Rosen said.

Depending on your goals, you could weigh “bunching deductions” into a single year to reach the itemized deduction threshold, she said.

For example, you could combine charitable gifts for multiple years into a single one rather than making donations yearly.

Typically, Rosen runs projections both ways to see how it could impact a client’s taxes for the current year.

Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Personal Finance

These key 401(k) changes are coming in 2025. What savers need to know

Published

on

Images By Tang Ming Tung | Digitalvision | Getty Images

As some Americans struggle to save for retirement, key 401(k) plan changes could soon make preparing easier for certain workers, experts say. 

Enacted by Congress in 2022, “Secure 2.0” ushered in sweeping changes to the U.S. retirement system, including several updates to 401(k) plans. Some of these provisions will go into effect in 2025.

Meanwhile, roughly 4 in 10 American workers say they are behind in retirement planning and savings, primarily due to debt, not enough income or getting a late start, according to a CNBC survey, which polled about 6,700 adults in early August.

More from FA Playbook:

Here’s a look at other stories impacting the financial advisor business.

Dave Stinnett, Vanguard’s head of strategic retirement consulting, said 401(k) plans are “the primary way most Americans prepare for retirement” and those accounts can work “very, very well” when designed properly.

Here are some key changes for 2025 and what employees need to know.

‘Exciting change’ for catch-up contributions

For 2025, employees can defer $23,500 into 401(k) plans, up from $23,000 in 2024. Workers ages 50 and older can make up to $7,500 in catch-up contributions on top of the $23,500 limit.

But there’s an “exciting change” to catch-up contributions for a subset of older workers in 2025, thanks to Secure 2.0, according to certified financial planner Jamie Bosse, senior advisor at CGN Advisors in Manhattan, Kansas.

Starting in 2025, the catch-up contribution limit will jump to $11,250, about a 14% increase, for employees ages 60 to 63. Including the $23,500 limit, these workers can save a total of $34,750 in 2025.

Only 14% of employees maxed out 401(k) plans in 2023, according to Vanguard’s 2024 How America Saves report, based on data from 1,500 qualified plans and nearly 5 million participants.

On top of maxing out contributions, an estimated 15% of workers made catch-up contributions in plans that allowed it during 2023, the same report found.

Shorter wait for part-time workers

Secure 2.0 has also boosted access to 401(k) and 403(b) plans for certain part-time workers.

Starting in 2024, employers were required to extend plan access to part-time employees who worked at least 500 hours annually for three consecutive years. That threshold drops to two consecutive years in 2025.

“That’s a very good thing for long-term part-time workers” who may have struggled to qualify for 401(k) eligibility, said Stinnett.

That’s a very good thing for long-term part-time workers.

Dave Stinnett

Vanguard’s head of strategic retirement consulting

In March 2023, some 73% of civilian workers had access to workplace retirement benefits, and 56% of workers participated in these plans, according to the U.S. Bureau of Labor Statistics.

“Coverage is my thing,” said Alicia Munnell, director of the Center for Retirement Research at Boston College.

“It’s important that people have coverage no matter where they go,” including from full-time to part-time at the same job, she added.

Mandatory auto-enrollment for new 401(k) plans

Continue Reading

Personal Finance

Top 10 S&P 500 stock winners since Election Day

Published

on

Stock traders on the floor of the New York Stock Exchange.

Michael M. Santiago | Getty Images News | Getty Images

Many large U.S. companies have seen their stocks swell since the presidential election.

The top 10 performing stocks in the S&P 500 index saw returns of 18% or more since Election Day, according to data provided by S&P Global Market Intelligence, which analyzed returns based on closing prices from Nov. 5 to Nov. 20.

Two companies — Axon Enterprise (AXON), which provides law-enforcement technology, and Tesla (TSLA), the electric-vehicle maker led by Elon Musk, an advisor to President-elect Donald Trump — saw their stocks gain more than 35%, according to S&P Global Market Intelligence.

By contrast, the S&P 500 gained about 2% over the same period.

‘Usually a bad idea’ to buy on short-term gain

Investors should be cautious about buying individual stocks based on short-term boosts, said Jeremy Goldberg, a certified financial planner, portfolio manager and research analyst at Professional Advisory Services, Inc., which ranked No. 37 on CNBC’s annual Financial Advisor 100 list.

“It’s usually a bad idea,” Goldberg said. “Momentum is a powerful force in the market, but relying solely on short-term price moves as an investment strategy is risky.”

Investors should understand what’s driving the movement and whether the factors pushing up a stock price are sustainable, Goldberg said.

Why did these stocks outperform?

Lofty stock returns were partly driven by Trump administration policy stances expected to benefit certain companies and industries, investment experts said.

Deregulation and a softer view toward mergers and acquisitions are two “key” themes driving bullish sentiment after Trump’s win, said Jacob Manoukian, head of U.S. investment strategy at J.P. Morgan Private Bank.

Trump administration may try to reverse Biden-era climate policies: former U.S. energy secretary

Relying solely on short-term price moves as an investment strategy is risky.

Jeremy Goldberg

portfolio manager and research analyst at Professional Advisory Services, Inc.

Rosy earnings and AI

Likewise, Axon beat analysts’ estimates in its Nov. 7 earnings results, with officials touting its “AI era plan” and raising earnings guidance, Goldberg said.

Axon and Palantir stocks were up 38% and 22%, respectively, from Nov. 5 to Nov. 20, according to S&P Global Market Intelligence.

Some companies benefited from a combination of policy and earnings, experts said.

Rows of servers fill Data Hall B at Facebook’s Fort Worth Data Center in Texas.

Paul Moseley/Fort Worth Star-Telegram/Tribune News Service via Getty Images

Take Vistra Corp. (VST), an energy provider, for example. The company’s stock jumped 27% after Election Day.

Vistra is in talks with large data centers — or “hyperscalers” — in Texas, Pennsylvania and Ohio to build or upgrade gas and nuclear plants, Stacey Doré, Vistra’s chief strategy and sustainability officer, said on the company’s Q3 earnings call Nov. 7.

Tech companies are building more and more such data centers to fuel the AI revolution — and need to source increasing amounts of energy to run them.

The ‘Elon Musk premium’

President-elect Donald Trump and Elon Musk talk ring side during the UFC 309 event at Madison Square Garden on Nov. 16, 2024 in New York.

Chris Unger | Ufc | Getty Images

But Tesla stock has additional tailwinds, experts said.

For one, Trump wants to end a $7,500 federal tax credit for EVs. Scrapping that policy is expected to hurt Tesla’s EV rivals.

Tesla has also been developing technology for driverless vehicles. In Tesla’s recent earnings call, Musk said he’d use his influence in Trump’s administration to establish a “federal approval process for autonomous vehicles.”

Continue Reading

Personal Finance

Student loan legal battles delay SAVE borrowers’ path to forgiveness

Published

on

Matthias Ritzmann | The Image Bank | Getty Images

With the Biden administration’s new student loan repayment plan is tied up in legal battles, millions of borrowers have had their monthly payments put on hold.

The break from the bills is likely a relief to the many federal student loan borrowers enrolled in the Saving on a Valuable Education plan, known as SAVE. But it may also be causing them anxiety over the fact that they won’t get credit on their timeline to debt forgiveness.

For example, those also enrolled in the Public Service Loan Forgiveness program, who are entitled to loan cancellation after 10 years, have seen their journey toward that relief halted during the forbearance.

“Borrowers are frustrated about the delay toward forgiveness,” said higher education expert Mark Kantrowitz. “They feel like they’ve been waiting for Godot.”

Here’s what borrowers enrolled in SAVE should know about the delay to debt cancellation.

Delay could stretch on for months

In October, the U.S. Department of Education said that roughly 8 million federal student loan borrowers will remain in an interest-free forbearance while the courts decide the fate of the SAVE plan.

A federal court issued an injunction earlier this year preventing the Education Department from implementing parts of the SAVE plan, which the Biden administration had described as the most affordable repayment plan in history. Under SAVE’s terms, many people expected to see their monthly bills cut in half. 

The forbearance is supposed to help borrowers who were counting on those lower monthly bills. But unlike the Covid-era pause on federal student loan payments, this forbearance does not bring borrowers closer to debt forgiveness under an income-driven repayment plan or Public Service Loan Forgiveness.

Adding to borrowers’ annoyance is that “those enrolled in the SAVE Plan were not given the choice of forbearance,” said Elaine Rubin, director of corporate communications at Edvisors, which helps students navigate college costs and borrowing. If borrowers want to stay in SAVE, they can’t opt out of this pause.

Borrowers enrolled in PSLF are especially concerned, Kantrowitz said. That program requires borrowers to work in public service while they’re repaying their student loans.

“They have been working in a qualifying job, but aren’t making progress toward forgiveness,” he said. “Some borrowers are working a job they hate, but are sticking with it in the expectation of qualifying for forgiveness. Others are close to retirement and don’t want to have to work past their normal retirement age just to get the forgiveness.”

What borrowers can do

Despite the delay toward forgiveness, there are still a few good reasons for borrowers to stay enrolled in SAVE, experts say. During the forbearance, borrowers are excused from payments and interest on their debt does not accrue.

Keep in mind: Even if you make payments under SAVE during the forbearance, your loan servicer will just apply that money toward future payments owed once the pause ends, the Education Department says.

If you’re eager to be back on your way to debt cancellation, you have options.

You may be able switch into another income-driven repayment plan that is still available. Under that new plan, you may have to start making payments again. Yet if you earn under around $20,000 as a single person, your monthly payment could still be $0, and therefore you might not lose anything by switching, Kantrowitz said.

More from Personal Finance:
Black Friday deals aren’t always the best
28% of credit card users are still paying off last year’s holiday tab
Here’s who can ‘easily afford’ holiday costs

Changing plans might be especially appealing to those who are very close to crossing the finish line to debt forgiveness and just want to see their balance wiped away, experts said. (You’ll likely be placed in a processing forbearance for a period while your loan servicer makes that switch. During that time, you will get credit toward forgiveness.)

The Education Department is also offering those who’ve been working in public service for 10 years the chance to “buy back” certain months in their payment history. This allows borrowers to make payments to cover previous months for which they didn’t get credit. But to be eligible for the option, the purchased months need to bring you to the 120 payments required for loan forgiveness.

“The buyback option might be eliminated under the Trump administration,” Kantrowitz said. “So, if you want to use it, you should use it now.”

Continue Reading

Trending