End-of-Year Tax Planning: 7 Step Checklist to Save on Taxes in 2024

This past weekend I consumed quite a bit of football. Tis the season, right? This doesn’t happen often these days with two little ones and a never ending to-do list. But it wasn’t just any weekend - It was Penn State vs Ohio State which has proven to be a heartbreaker weekend for my beloved Nittany Lions. 2024 has proven no different, unfortunately, as the Buckeyes of Ohio State marched into Happy Valley for the W again.

But this time, I noticed what seems to be a theme with this particular matchup.

The best teams don't just play - they execute a carefully crafted strategy to maximize every remaining second. In fact, in my frustration, I even texted a buddy during the game and said “How are the Buckeyes always so prepared for us!?” 

As we approach the end of 2024, your law firm's tax strategy deserves the same level of tactical precision.

The moves you make now can significantly impact your tax position, but timing is everything.

Let's dive into seven game-changing opportunities that could help reduce your tax burden and strengthen your financial position before the clock runs out on 2024.

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1. RETIREMENT CONTRIBUTIONS: KNOW YOUR DEADLINES 

If you've had a strong year, your estimated P&L statement is your best friend right now. Why? Because it helps you gauge exactly how much you can contribute to various retirement accounts. But here's the critical part - not all deadlines are created equal.

Some accounts demand your attention by December 31st, while others give you until tax filing day. For instance, 401(k) contributions must be made by year-end, but you have until the tax deadline to fund your SEP IRA. This timing difference creates interesting strategic opportunities for law firm owners.

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2. HSA: THE TRIPLE-TAX ADVANTAGE PLAY 

Health Savings Accounts offer a unique trifecta of tax benefits - tax-deductible contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses. For 2024, you can contribute up to $4,150 for individual coverage or $8,300 for family coverage, plus an additional $1,000 if you're 55 or older.

Pro tip: Consider maxing out your HSA before year-end. Unlike FSAs, these funds roll over indefinitely.

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3. QUALIFIED BUSINESS INCOME: THE STRATEGIC DEDUCTION 

The QBI deduction can be a game-changer for law firm owners, potentially allowing you to deduct up to 20% of your qualified business income. However, this deduction requires strategic planning, especially if your income approaches the threshold limits.

Consider combining various strategies like:

• Maximizing retirement contributions to reduce taxable income
• Timing major business purchases
• Evaluating your business structure
• Strategic timing of income and expenses

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4. TAX-LOSS HARVESTING: TURNING LEMONS INTO LEMONADE 

Market volatility isn't always bad news. Through tax-loss harvesting, you can:

• Offset capital gains from successful investments
• Deduct up to $3,000 against ordinary income
• Strategically reposition your portfolio for future growth

Think of it as a portfolio refresh with a tax benefit bonus.

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5. ROTH CONVERSIONS: THE LONG GAME 

2024 might be your year for a Roth conversion if:

• Your income is lower than usual
• You expect higher tax rates in the future
• You want to diversify your tax exposure in retirement

For high-income earners, don't overlook the back-door Roth IRA strategy. It's a perfectly legal way to access Roth benefits despite income limitations.

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6. Required Minimum Distributions (RMDs): DON'T LEAVE IT TO CHANCE 

If you're required to take RMDs, mark December 31st, 2024, on your calendar in red. Missing this deadline can result in a painful 25% penalty on the amount not taken.

But here's something many miss: Even if you inherited an IRA and aren't required to take RMDs, consider taking strategic distributions. Why? To avoid a potentially massive tax hit down the road when forced distributions kick in.

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7. CHARITABLE GIVING: STRATEGIC GENEROSITY 

Consider using a Donor Advised Fund (DAF) to maximize your charitable giving strategy. A DAF allows you to:

• Take an immediate tax deduction
• Invest the funds for tax-free growth
• Distribute to charities over time
• Potentially bunch multiple years of giving into one tax year

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TIME TO EXECUTE 

Just like the big game we talked about, the key to successful year-end tax planning is execution. Start with these steps:

1. Review your estimated 2024 tax liability
2. Identify which strategies align with your situation
3. Mark critical deadlines on your calendar
4. Consult with your tax professional for implementation

Remember: Tax planning isn't about paying the least amount of taxes this year - it's about paying the least amount of taxes over your lifetime.

Want to dive deeper into any of these strategies? Let's talk about how we can customize these approaches for your firm's specific situation.

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