December 16, 2024

As the year winds down, it’s smart to schedule a meeting with your CPA. Changes in your financial situation, big purchases, or tax laws can all affect how much you owe. A year-end review can help you avoid surprises and take advantage of tax-saving opportunities.

Here are 9 key reasons why you should consult with your CPA before the year ends:

1. Review Your Income and Taxes

Is your income higher or lower this year? If you retired, changed jobs, or earned more money, you may need to adjust your tax withholdings or make quarterly payments to avoid penalties. Also, paying state property taxes before year-end might help you claim a federal deduction.

2. Check for Capital Gains and Losses

Did you sell stocks or rebalance your portfolio? Selling investments can lead to capital gains taxes. If you inherited an investment account, be aware that future sales are taxable. Work with your CPA to calculate gains early and consider harvesting losses to reduce your tax bill.

3. Handling Inheritances

While inherited money is usually tax-free, selling inherited assets can trigger taxes. If you inherit an IRA, annuity, or retirement account, rules vary. You may need to take withdrawals, which are taxed at your bracket. However, Roth IRA payouts remain tax-free.

4. Bought, Sold, or Refinanced a Home?

The profit from selling your main home is tax-free up to $500,000 for married couples, as long as you meet the rules. If you paid off or refinanced your mortgage, you may be able to deduct points. Your CPA can help confirm what deductions you qualify for.

5. Plan Charitable Donations Wisely

Donating appreciated investments (like stocks) may save you more than writing a check. If you’re over 70½, consider transferring your Required Minimum Distribution (RMD) directly to a charity. This can reduce your taxable income. Just note that donation limits apply, and there’s no federal deduction for this strategy.

6. If You’re Recently Married, Divorced, or Widowed

Life changes affect your taxes. Married couples may face higher or lower rates depending on their combined income. Divorced individuals need to review alimony rules, as it’s no longer tax-deductible for the payor. If you’re widowed, you can still file jointly this year but may need to adjust your future tax payments.

7. College Costs and Tax Breaks

Parents of college students may qualify for the American Opportunity Tax Credit, which offers up to $2,500 per student for the first four years of college. Recent graduates working fewer than 245 days in a year can ask employers to withhold less tax, leaving them with more money now.

8. Managing Your Tax Bracket in Retirement

If you’re newly retired, work with your CPA to manage your tax bracket. Strategies like withdrawing money from retirement accounts or converting funds to a Roth IRA can help you save on taxes. You might also defer Social Security or use other tax-free options to access cash.

9. Understand How New Tax Laws Impact You

Tax laws have changed significantly in recent years. The 2017 Tax Cuts and Jobs Act doubled the standard deduction and changed rules for state and local taxes, medical expenses, and more. The SECURE Act in 2019 brought big changes to retirement savings. Your CPA can help you understand how these updates affect you.

Year-end tax planning isn’t just about saving money—it’s about being prepared. Contact Omni360 for your financial planning needs to ensure your finances are on track and optimized for your goals.