With the arrival of fall, it’s an ideal time to begin implementing strategies that could reduce your tax burden for both this year and next.

One of the first planning steps is to determine whether you’ll take the standard deduction or itemize deductions for 2024. You may not itemize because of the higher 2024 standard deduction amounts ($29,200 for joint filers, $14,600 for singles and married couples filing separately, and $21,900 for heads of household).

If you do itemize, deductible expenses include medical expenses that exceed 7.5% of adjusted gross income (AGI), state and local taxes up to $10,000, charitable contributions, and primary and secondary residence mortgage interest on acquisition and equity debt, but these deductions won’t save taxes unless they’re more than your standard deduction.

The Benefits of Bunching

You may be able to work around these deduction restrictions by applying a “bunching” strategy to pull or push discretionary medical expenses and charitable contributions into the year where they’ll do some tax good. For example, if you can itemize deductions for this year but not next, you may want to make two years’ worth of charitable contributions this year.

Other Ideas to Consider

• Defer income until 2025 and accelerate deductions into 2024 if doing so enables you to claim larger tax breaks for 2024 that are phased out over various levels of AGI. These include deductible IRA contributions, the Child Tax Credit, education tax credits and student loan interest deductions. Deferring income also may be desirable for taxpayers who anticipate being in a lower tax bracket next year due to changing financial circumstances. However, in some cases, it may be beneficial to accelerate income into 2024 — for example, if you expect to be in a higher tax bracket next year.
• Contribute as much as you can to your retirement account, such as a 401(k) plan or IRA, which can reduce your taxable income.
• Higher income individuals should be careful of the 3.8% net investment income tax (NIIT) on  unearned income which includes interest, dividends, capital gains and rental income. The surtax is 3.8% of the lesser of: 1) net investment income (NII), or 2) the excess of modified AGI (MAGI) over a threshold amount. That amount is $250,000 for joint filers or surviving spouses, $125,000 for married individuals filing separately and $200,000 for others. As year-end nears, the approach taken to minimize or eliminate the 3.8% surtax depends on your estimated MAGI and NII for the year.
• Sell investments that are underperforming to offset gains from other assets, referred to as loss harvesting.
• If you’re age 73 or older, take required minimum distributions from individual retirement accounts (IRAs) to avoid penalties.
• Spend any remaining money in a tax-advantaged flexible spending account before December 31 because the account may have a “use it or lose it” feature.
• If you’re age 70½ or older by the end of 2024, consider making 2024 charitable donations via qualified charitable distributions from a traditional IRA, also referred to as qualified charitable donations — especially if you don’t itemize deductions. These distributions are made directly to charities from your IRA and the contribution amount is not included in your gross income or deductible on your return.
• Make gifts sheltered by the annual gift tax exclusion before year end. In 2024, the exclusion applies to gifts of up to $18,000 made to each recipient. These transfers may save your family taxes if income-earning property is given to relatives in lower income tax brackets who aren’t subject to the kiddie tax.

These are just some of the year-end strategies that may help reduce your taxes. Reach out to a Wegner CPAs Tax Advisor for a custom tailored plan that will work best for you.