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As we approach the end of 2024, you're sitting on what could be one of your last opportunities to take advantage of historically low tax rates before they potentially change forever. The decisions you make in these final weeks of the year could mean the difference between paying thousands more in taxes or keeping that money working for your future. Hey, everyone.
My name is Danny Gudorf, a financial planner and owner of Gudorf Financial Group. And in this video, I'm going to share eight powerful year-end tax saving strategies that could transform your year-end taxes. These aren't just theoretical concepts. These are proven strategies that I've personally helped clients implement to save a significant amount on their income taxes, both this year and throughout their retirement.
What makes this year's tax planning particularly crucial is that we're approaching a critical juncture. The Tax Cuts and Jobs Act of 2017 is set to expire at the end of 2025. This means some of these strategies may never be as valuable as they are right now. So let's begin with one of the most fundamental yet powerful tax saving tools at your disposal.
This is retirement plan contributions. When we talk about retirement plan contributions, we're looking at it through a spectrum of different options, each with its own unique advantages and considerations. Whether you're considering a traditional IRA, a Roth 401k, a traditional IRA, or a Roth IRA, each vehicle offers distinct advantages that need to be carefully weighed against your current tax bracket.
and future retirement goals. For those in a higher tax bracket, traditional 401Ks and IRAs often present a compelling opportunity for an immediate tax savings through income deferrals. Conversely, if you find yourself in a lower tax bracket currently, or your tax bracket compared to what you'll be late in retirement is lower, the Roth option becomes increasingly attractive.
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While you won't receive an immediate tax benefit, the long-term advantage of tax-free growth and qualified withdrawals can prove invaluable in your later retirement years. It's worth noting that for 2024, contribution limits have been adjusted for inflation, and understanding these limits is crucial for maximizing your tax advantages. Beyond individual contributions, think about employer matching programs.
This represents essentially free money that shouldn't be left on the table. Whether your employer offers a 3%, 4%, 5%, or even a 6 % match, ensure you contribute at least enough to capture the full match. That should be a priority in your tax planning strategy. Remember, even if you're retired but you still have earned income, you can still make a contribution
to a retirement account. A lot of my clients have side jobs or consulting income in retirement and they have earned income which allows them to contribute to these retirement accounts. In most cases, they're making seven or $8,000 Roth IRA contributions. In addition, they can also make spousal Roth IRA contributions. All right, moving on.
To our second strategy, let's discuss something called tax loss harvesting. A strategy, while not always pleasant to implement as it involves recognizing some losses on your investments, can prove extremely valuable in the right circumstances. Tax loss harvesting is essentially turning market downturns into tax advantages by strategically selling investments that have declined in value.
While nobody enjoys seeing their investments lose value, this strategy allows you to make the best of a difficult situation by utilizing these losses to offset capital gains and even ordinary income up to certain limits. The strategy becomes particularly powerful when you understand that you can use these losses to offset not just capital gains,
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but also up to $3,000 of ordinary income per year with the ability to carry forward additional losses to future tax years. When implementing tax loss harvesting, it's crucial to be aware of wash sale rules, which prevents you from claiming a loss if you purchase the same or substantially identical security within a 30-day period before or after the sale.
This means carefully planning is required to maintain your desired asset allocation while still capturing the tax benefits of the loss. Additionally, it's important to consider the transaction cost and future potential appreciation of the investments you're selling, as these factors can impact the overall effectiveness of this strategy. Now, our third strategy kind of follows along with our second one.
but it's something called tax gain harvesting. It might seem counterintuitive at first, but it can be incredibly powerful tool for the right client. This strategy becomes particularly valuable when we consider the unique tax treatment of long-term capital gains and the existence of the 0 % tax bracket for these gains. In 2024,
The 0 % capital gains tax bracket extends to taxable income of $47,025 for individuals and $94,050 for married couples filing jointly. This creates a remarkable opportunity for investors to realize gains without incurring any federal tax liability, effectively resetting their cost basis without higher tax consequences.
The strategic value of tax gain harvesting becomes even more apparent when we consider the long-term implications. By realizing gains in years where your income has fallen within the 0 % bracket, you can potentially reduce your tax liability in future years when your income might be higher. This is particularly beneficial for retirees who are managing their income streams or for individuals who expect their income to increase significantly in the future.
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The fourth strategy is going to be Roth IRA conversions. This represents one of the most powerful tools available for managing your lifetime tax liability. This strategy has gained significance and popularity given the current tax environment and the scheduled sunset of the Tax Cuts and Jobs Act at the end of 2025. When executing a Roth conversion,
you're essentially making a strategic decision to pay taxes now in exchange for tax-free growth and withdrawals in the future. This becomes a particularly powerful strategy when you consider that Roth IRAs are also not subject to required minimum distributions and can be passed to beneficiaries tax-free. The timing of Roth conversions is crucial, and the current tax environment
through 2025 presents a unique opportunity. With these historically low tax rates in place until the end of 2025, there's a compelling case for accelerating conversions during this window. However, it's important to approach conversions strategically, often spreading them across multiple years to avoid pushing yourself into higher tax brackets.
The ideal timing often falls in between your gap years, between retirement and when you turn RMD age. This is when your income might be lower and you have more control over your tax brackets. When considering whether to prioritize Roth conversions or tax gain harvesting and the 0 % capital gains bracket, several factors come into play. First,
Ordinary income tax rates are typically higher than capital gains rates, making it generally more beneficial to address this tax-deferred money first. Second, the presence of RMDs on your traditional retirement accounts creates a forced taxable event in the future. While appreciated, investments can benefit from a step-up in basis at death. That's a key factor that we have to remember.
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Finally, the flexibility and tax-free growth potential of Roth accounts often make them more valuable in the long term for both you and your beneficiaries. So keep this in mind. With Roth conversions though, you can convert too little, you can also convert too much. So it's important to really analyze and have a good plan of action when you go to do Roth conversions. Moving on to our...
Fifth strategy that approaches charitable giving. This approach involves a direct donation of appreciated stock to a charitable organization. This strategy offers a powerful double tax benefit that many investors overlook. When you donate appreciated stock that you've held for more than a year directly to a qualified charity, you can deduct the full
fair market value of the stock while avoiding the capital gains tax you would have paid if you had sold the stock first. This creates a more tax-efficient giving strategy compared to selling the stock and then donating the proceeds. For example, if you have $10,000 worth of stock with a cost basis of $2,000, donating the stock directly to a charity
allows you to claim a $10,000 charitable deduction while avoiding the tax on the $8,000 gain. The charity, being tax-exempt, can then sell the stock without incurring any capital gains tax. This strategy becomes particularly powerful when coordinating it with other charitable giving approaches and can essentially be beneficial
in years when you have significant appreciated positions in your portfolio. The sixth strategy that we're going to talk about is using a donor-advised fund, which can be thought of as a charitable investment account. A donor-advised fund offers immediate tax benefits while providing ongoing control over the timing and the recipients of your charitable giving. When you contribute to a donor-advised fund,
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you receive an immediate tax deduction for the full value of your contribution, whether it's cash or appreciated stock. The funds can then be invested and grow tax-free within that donor advice fund until you decide to grant them to your chosen causes or charities. Donor advice funds offer remarkable flexibility in tax planning as they allow you to separate the timing
of your tax deduction from the actual charitable gift. This can be particularly valuable in high-income years when you want to maximize your charitable deduction but haven't yet decided on those specific charities you want to support. The funds can remain in the donor advice fund indefinitely, growing tax-free while you thoughtfully plan out your charitable giving strategy. Our seventh strategy,
piggybacks on the fifth and sixth one, and this is where we're going to be bunching or stacking our deductions. This has become increasingly relevant since the Tax Cuts and Jobs Act significantly increased the standard deduction. With the 2024 standard deduction at $29,200 for married couples filing jointly, many taxpayers who previously itemized on their return
now find themselves taking the standard deduction. However, by strategically bunching multiple years worth of charitable contributions into a single tax year, you can potentially exceed the standard deduction threshold and maximize your tax benefits. This strategy becomes even more powerful when combined with a donor advice fund. For example, if you have that typical $10,000 annual donation to charity,
and have other itemized deductions totaling $25,000, you would normally take the standard deduction since your itemized deductions of $30,000 wouldn't significantly exceed the standard deduction. However, by bunching three years worth of charitable contributions, $30,000 into a single year through a donor advice fund, you could itemize deductions of $55,000 in that year.
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then take the standard deduction in the following two years. This approach can generate significant tax savings while maintaining a constant charitable giving schedule through your donor advice fund. All right, the eighth and final strategy we're gonna talk about today is going to be qualified charitable distributions, otherwise known as QCDs. These offer unique advantages for
retirees age 70 and a half and older who have traditional IRAs. A QCD allows you to transfer up to $105,000 directly from your IRA to qualified charities in 2024. This distribution can satisfy part or all of your required minimum distribution while excluding the amount from your taxable income entirely.
This strategy becomes particularly useful and valuable when you consider that it effectively reduces your adjusted gross income, which can impact various tax calculations, including Medicare premiums and the taxation of your Social Security benefits. The key to maximizing the benefit of QCDs lies in proper execution. The distribution must be made directly from your IRA
to the qualified charity. If the funds pass through your hands to your bank account first, you'll lose the tax break. It's crucial to maintain proper documentation as IRA custodians specifically don't identify QCDs on their 1099R. This needs to be coordinated with other tax planning strategies. QCDs can be a powerful tool for managing your tax liability while supporting
your charitable goals. These eight strategies form the foundation of our tax planning approach at Goudar Financial Group. If you'd like to see how these tax saving strategies could work for you and for your specific situation, click the link below to schedule your free retirement assessment. We'll analyze your unique retirement picture and create a customized plan to potentially save you thousands
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and taxes throughout your retirement. And if you want to learn how to maximize the 0 % capital gains tax bracket that we talked about, don't miss our other video right here on how to legally earn over $100,000 in income while paying 0 % in taxes. This completely legitimate strategy takes full advantage of specific provisions in the tax code that many people
aren't aware of. I'll break down exactly how our clients are using this strategic tax planning strategy to maximize their retirement income while minimizing their tax burden.