Tax Strategies to Get Ahead on Planning for Next Year
By Mark Sipos, LFG Tax Director
Filing season may be over, and nobody wants to think about filing taxes again, but now is the time to get planning ideas into action. Getting an early start on tax planning for 2025 offers greater flexibility, the ability to budget more properly, and may allow you to take full advantage of some planning ideas versus waiting until the last minute. Here are a few things to consider:
- Personal Tax Filing Review: Analyze your previous year's tax return. Did you owe a lot? Get a large refund? This can indicate the need for adjustments to your withholdings or tax planning strategies. Did your tax preparer offer any insights to lower your tax bill that need to be executed?
- Adjust Tax Withholdings: If you had a large tax bill or refund, use the IRS Tax Withholding Estimator to calculate the appropriate withholding amount and update your Form W-4 with your employer. Tax withholdings on pension distributions can be adjusted using Form W-4P.
- Estimate Taxes (if applicable): If you have income not subject to withholding (self-employment, investments, etc.), estimate your tax liability and make quarterly estimated tax payments to avoid penalties and interest. We saw higher tax bills in 2024 due to higher earnings on savings and CDs, and large capital gain distributions.
- Optimize Deductions and Credits: Research and identify potential deductions and tax credits you might be eligible for, and plan how to maximize them.
- Consider Retirement Contributions: Review your retirement plan contributions and ensure you are maximizing tax advantages. Look at tax-favored medical savings plans as well.
- Update Financial Plans: Reassess your budget, spending habits, and investment strategies to ensure they align with your financial goals.
- Plan for Major Life Events: Consider the potential tax implications of any anticipated major life events (marriage, home purchase, college tuition, etc.).
At LFG Tax Services, we proactively engage in post-tax season planning, which may help you reduce your tax burden, optimize your financial strategy, and ensure a smoother experience for the next tax season. If you want to get ahead on your tax planning, give us a call today. We’re here to help!
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