2024 Year End Tax Planning Strategies

Shawn (00:18): Welcome back to Christian Financial Perspectives. My name’s Shawn Peters. I’m joined as always by my Father-in-Law and esteemed colleague Bob Barber who writes pretty much all of these. He does let me help a little bit, I think on some of the drafts and final wording, but yeah, Bob’s definitely the brains behind these. So today we’re going to be covering “2024 Year End Tax Strategies”. Now when this video comes out, it is still helpful and relevant if you act fast, but if you’re watching this in 2025, well I guess maybe think about some of these for the end of this year. Bob (00:49): And I’ve updated all of the numbers for this year. So like you say, this has got to be done before the end of the year. And you know what else? By not listening to this, you’re losing a lot of money. I could tell you that, too, because we’re going to give you four or five ways in the next 10, 15 minutes that this could be worth several thousand. Shawn (01:09): $1,000, $3,000 maybe more, depending on your income tax bracket. Bob (01:13): Yeah, that’s right. Shawn (01:14): So if saving money on taxes sounds like a valuable 10 to 15 minutes of your time, stay tuned. Before we get into this, again, December 31st is the deadline, but we’ve got a couple scriptures for you since this is about taxes, but also we’re going to talk a little bit about giving. Our first one is Romans 13:6-7, “For because of this you also pay taxes, for rulers are servants of God devoting themselves to this very thing, pay to all what is due them, tax to whom tax is due, custom to whom custom, respect to whom respect, honor to whom honor.” Bob (01:48): That’s a different way of saying that. I’ve seen the other ones where pay to Caesar what is Caesar’s. Shawn (01:52): Yeah. Bob (01:52): Of course that was Jesus said that, too. Shawn (01:54): That’s right. And keep in mind whether our elected officials and other people are actively trying to honor God, they are still in that position at the grace and mercy of the Lord, just like Saul. God gave them the king they wanted. Wasn’t really who God wanted, but alright, fine, I’ll give you a king. And then our second one is one Timothy 6,:17-19, “Instruct those who are rich in this present world not to be conceited or to set their hope on the uncertainty of riches, but on God, who richly supplies us with all things to enjoy, instruct them to be good, to be rich in good works, to be generous and ready to share, storing up for themselves the treasure of a good foundation for the future so that they may take hold of that which is truly life.” Bob (02:38): Amen. Those are some good scriptures and talk about taxes. And I tell you God’s provision, I remember Ron Blue saying, “Don’t ever complain about paying taxes. It’s God’s provision.” Shawn (02:47): That’s right. Bob (02:48): But let’s pay as little as we can and legally, and one of the things before we get into these strategies that you’ve got to understand is the standard deduction, which is $29,200 if you’re married, filing jointly and $14,600 for single filers. That is this year’s numbers updated. And unless your itemized deductions are going to be above that, you don’t even need to itemize your deductions. Shawn (03:17): Don’t waste your time with it. Bob (03:18): Yeah. That’s right. Or a potential IRS audit. Shawn (03:22): Yeah. Married couples over 65 can add another $1,550 to the $29,200 standard deduction and single filers can add another $1950 or 1,950 to their standard deduction. So without further ado, let’s examine some year end tax strategies starting with the one Bob has seen the most used. Bob (03:44): I have, I’ll tell you what. Shawn (03:46): …Or most unused. Bob (03:47): I mean maxing out your contributions to those company qualified plans. I am amazed at how people… Shawn (03:55): 403B, whatever it might be… Bob (03:56): 457 plan. I’m amazed how many people do not do this, Shawn, just leaving thousands of additional dollars they have to pay in taxes. Shawn (04:05): By far the biggest is the biggest deduction that you could hit because of how much you can contribute. Bob (04:10): That’s correct. And if you’re under 50, what’s that number again under 50? Shawn (04:15): $23,000 If you’re under 50. So if you’re over 50, you can actually do up to $30,500. Bob (04:22): You realize if you’re… Shawn (04:22): That’s a big deduction. Bob (04:23): It is. And if you’re in that 25 or 30% tax bracket, there’s $3,000 of tax savings potentially if you’re not putting anything in or maxing that out. We’ve just paid for the day’s program. I mean we’re talking several thousand, but easily a thousand dollars. Shawn (04:41): Keep in mind we are talking about pre-tax. So if you are contributing to a company qualified plan as like for Roth or Bob (04:49): or 401k. Shawn (04:49): That’s not obviously going to help you. So you want to make sure that if you’re trying to go after this, make sure you’re doing the pre-tax contributions to that plan. Bob (04:58): The second strategy that we see a lot of is people not doing is maxing out their charitable contributions. And I would say this is the majority of us because I don’t know many people that give away 30 to 50 to 60% of their income every year, but you can legally do this and receive a tax deduction. Shawn (05:19): You have the rules for this, the 30, 50, 60% rules. Bob (05:24): So the 30% rule has to do with you can give up the 30% of non cash assets. So you could carve off some stocks that have maybe a high gain in them and if you sold them, you’d have a lot of tax. You could give those to your church or to a donor-advised fund. You could give things like an old automobile or maybe even some real estate. But we’ve gone over in past programs all the different ways to give non-cash assets, and that’s 90% of your assets. Shawn (05:57): And then you can give up to 50 to 60% of your adjusted gross income in cash to charities. Bob (06:02): That’s right. That’s right. And if you don’t know what charities you want to give to and you just need the tax deduction for this year, I would highly suggest that you open up a donor advised fund. Shawn (06:13): Open and contribute the cash to the donor advised fund before December 31st. Because the benefit then is you get to take the deduction for 2024 tax year, but you can decide later, like say in 2025 what charity or charities you actually want to give money to from the donor advised fund. Bob (06:29): And you can go five years out if you want to, but you’ll get the tax deduction right now. This is a strategy I personally use. The first two strategies we talked about. I always max out my 401k, and the second one is I always give to a donor-advised fund usually on the last two or three days of the year. Shawn (06:47): Just to make sure you hit that. Bob (06:50): That I hit the highest number that I can for giving and I get the tax deduction for it. It’s so easy to open up one, too. You can do one online – like we used the National Christian Foundation. You can go right online and open it up. Shawn (07:03): Also remember, taxpayers over 73 can give up to $100,000 tax free to a charity from their traditional IRA if the transfer is directly from the traditional IRA to the charity, which makes so much more sense than giving cash to your favorite charity or church if you’re over 73 because of those tax savings. Bob (07:23): Never take money from your IRA that you’re going to then give to charity, because remember the standard deduction, unless you hit over that standard deduction, it’s not going to be deductible. So it makes so much more sense to go directly from your IRA to the charity, but you do have to be in that RMD stage, which is above 73. Shawn (07:39): But hey, think about it. The tax savings that you’re not having to pay, that goes directly to the charity. Bob (07:46): And I’d say the majority of our clients over 73, this is what they do in lieu of leaving their tithe. They do this as a tithe versus giving cash because it makes so much sense. Shawn (07:57): Because you have that RMD that you have to do anyway. So tax strategy number three, max out property taxes in a single year. So if you own a home, pay your property tax bill before the end of the year or wait until next year and double up next year. The deduction for state and local taxes, including real estate taxes, is limited to $10,000, $5,000 for married filing separately. So this is just a good way that if you need that extra, say, up to $10,000 that you could pay both this year and next year’s taxes in the same year. Most people pay theirs in what, January? Bob (08:35): Or they pay in December, but like you say, if your property taxes are about $5,000 or $6,000 and you’re married, pay them both. Like you say pay in January and December and then the next year you don’t pay it, and then the following year you do the same thing so that it can get up high enough to go over that standard deduction. And we see this not happening a lot. Shawn (08:55): This is a great one. Maybe one of you received a bonus or something like that. And so in this given year, if you needed a little bit extra for that deduction, maybe double up on the taxes. Alright, number four, tax loss harvesting. Bob (09:09): That has to do with, let’s say you have a large capital gain, let’s say you even have some small capital gains like in some stocks. Stocks have done very well this year. So you have some large gains, but maybe you have a few stocks or something that you’ve had a loss on, a capital loss. If you want to do this before the end of the year, if you have something that’s sitting there with a capital loss and you’ve had these gains, you can sell whatever you want to at the capital loss, you can get that capital loss and it will go against the capital gain. We do this a lot around here and we’re about to be looking for any capital losses. It’s kind of hard to find this year, but we can also use capital losses from years before when the market was weighed down, we took those losses and they were paper losses and we didn’t get to use them all. So they’ll get to be applied towards future gains. Shawn (10:00): That’s right. Bob (10:00): Okay. Shawn (10:01): Alright. Number five, by the way, we’re doing seven, so stick with us, but number five, make gifts to responsible children or grandchildren. Bob (10:08): You notice I said responsible? Shawn (10:09): Yeah. Bob, why’d you put responsible? What do you mean by that? Bob (10:12): Well, if they’ve not been responsible with how they handle money, what makes you think they’re going to be responsible when you give them money? And that’s what I mean by that. Shawn (10:22): Well, that doesn’t make sense, Bob, because what I’ve seen of most people that win the lottery, they’re usually very responsible with the money. They already know how to handle it. Bob (10:29): Yep. But you can give… Shawn (10:30): Sarcasm obviously. Bob (10:31): Yeah, I know. I know. But if they’re responsible and you can give up to $18,000 to your children or grandchildren or even great-grandchildren per year and they don’t have to declare it as income, it goes with yours, too. There’s no tax burden on you. Shawn (10:47): Nice. Okay, so comment down below if you think Bob should do that for my wife, Jenna. I think she’s been pretty responsible. Bob (10:54): Yeah. Oh definitely. She’s the saver of the bunch, right? Shawn (10:58): Yeah. You at least know she wouldn’t spend it…ever. Bob (11:02): I know. We have to get her to go spend money if we want to. Shawn (11:05): Alright, number six, income timing. Bob (11:07): Yeah. Think strategically about how you’re going to be taking your income. Now most people, they have to take it, but let’s say you have a big bonus coming and you could forego that bonus right now. If your employer will do this, you could go talk to them and say, “Could you give me that bonus next year?” Shawn (11:30): Right after January 1st? Bob (11:32): But only do that if you think your income’s going to be lower next year. And this really applies to someone that’s about to retire. If you think you’re going to be retiring in February or March or May or June of next year, if you can wait to take that bonus until next year, definitely do. Shawn (11:51): The other example would be if someone needed money from one of their retirement accounts and it was towards the end of the year. Okay, well you have to be careful if you’re already receiving social security on that income timing because, and I know Bob, you had someone, a client very recently where I think they needed an extra maybe like 30k total, and the issue was if they took the full 30k before January 1st, it would’ve actually done this retroactive taxation on the social security because of social security plus their normal income plus the extra income. Instead what they did, I believe was they did $15,000. Bob (12:26): Did 15k this year and 15k the next. Shawn (12:28): Exactly. Great example of income timing where not only did you save on taxes, but you saved yourself on potential extra taxes that might’ve been triggered. Bob (12:36): On the social security. Correct. Number seven, now we’re down to the last one. Down to the last one today. Shawn (12:40): Buy business equipment. Bob (12:41): We do that a lot around here, don’t we? If you own any kind of business, even if it’s a home business, it could be a very small business, but if you need that new computer and you’re going to need a new computer in the next few months, or you need some new office equipment that you know you’re going to need in March or April, go ahead and buy it now so you get that tax deduction right now. Shawn (13:01): Exactly. Same thing with a vehicle. So if you’ve got a service business or something where you’re not just sitting at the computer like we do and look at the stock markets all day, well the car, I mean that’s a nice big expense that you can use to try to get that deduction. Bob (13:16): That car has to weigh a certain amount. You need to do some research on what type of car you can buy for it to be a tax deductible. Shawn (13:24): That’s right. So in conclusion, there are many more year end tax strategies, but that’s all we’re going to cover for today. I want to make sure we don’t throw too much at you, but hopefully you can save thousands of dollars in taxes for 2024 by using one or more of these year end tax saving strategies. And just remember, all these strategies we mentioned today must be done before the end of the year. So, time is of the essence, you cannot procrastinate unless you want to use these for 2025. Bob (13:51): And we very highly recommend that you run this by a CPA or an accountant before you integrate any of these tax strategies. But we’re here to help you integrate these strategies before the end of the year. That’s the main thing. And don’t, please don’t wait till December 27th to do this. I mean these things can be done right now, especially with the first one that we mentioned today about maxing out your 401k. Shawn (14:15): That’s right. Bob (14:15): You might need to get with your HR manager and figure out how you’re going to do that. Shawn (14:17): That’s an easy one for sure. Yeah, feel free to call or text to discuss this 830-609-6986 during our normal business hours. We do have some other year end tax strategies we didn’t discuss today. We have financial planning software we use that can be extremely beneficial to kind of visualize and understand and see the impact of these. But I guess that’ll wrap it up for today. Bob (14:38): Just give us a call at 830-609-6986 or text us and we’ll be glad to help you. Shawn (14:44): Thanks for joining us as always, and God bless. [DISCLOSURES] * Investment advisory services offered through Christian Investment Advisors Inc dba Christian Financial Advisors®, a registered investment advisor registered with the SEC. Registration as an investment advisor does not imply a certain level of skill or training. Comments from today’s show are for informational purposes only and not to be considered investment advice or recommendations to buy or sell any company that may have been mentioned or discussed. The opinions expressed are solely those of the hosts, Bob Barber and Shawn Peters, and their guests. Bob and Shawn do not provide tax advice and encourage you to seek guidance from a tax professional. While Christian Financial Advisors® believes the information to be accurate and reliable, we do not claim or have responsibility for its completeness, accuracy, or reliability.