New Year, New Taxes. What Can I Do?
Written by: Vincenzo Testa, CPA, CFP®, ECA
As we roll into January 2025, it’s time to focus on more than just resolutions. It is time to take charge of your taxes. By acting early in the new year, you can help yourself minimize your tax liabilities.
Max Out Retirement Contributions Early
One of the simplest ways to reduce taxable income is to contribute to tax-advantaged retirement accounts like a 401(k), Traditional IRA, or Roth IRA. You can still maximize your Roth and Traditional IRA ($7,000 with a $1,000 50+ Catch up) until you file your 2024 tax return and/or until April 15th, 2025. Participants can also adjust their recurring contributions to account for the new contribution limits issued by the IRS.
Adjust Your Tax Withholding
Changes in income, marital status, or dependents from the prior year may require a tweak in your tax withholding. Use the IRS Tax Withholding Estimator to ensure the correct amount is being withheld from your paycheck. This proactive step helps avoid surprises at tax time—whether it’s a hefty bill or an oversized refund.
Organize Records and Track Expenses
Good tax planning requires excellent recordkeeping. Create a system to track deductible expenses, like business expenses, charitable donations, and medical expenses. If you’re self-employed, use a dedicated app or spreadsheet to monitor mileage and other business-related expenses.
Consider Energy-Efficient Home Improvements
If you’re planning to upgrade your home, explore energy-efficient options like solar panels or energy-efficient windows and appliances (https://www.nyserda.ny.gov/All-Programs/Inflation-Reduction-Act/Inflation-Reduction-Act-homeowners). Federal and state tax credits can significantly reduce the cost of these improvements while lowering your energy bills.
Plan for Estimated Tax Payments
For self-employed individuals and those with significant non-wage income, such as rental or investment income, estimated tax payments are a necessity. Starting the year with a clear plan for quarterly payments helps you avoid penalties and ensures you’re not caught off guard.
How Will Planning Ahead Help Me?
The beginning of the year is a perfect time to take control of your taxes. By implementing these strategies now, you will be better prepared for the tax season. More importantly, you’ll maximize your financial well-being—leaving you with more resources to achieve your goals.
If you have specific questions regarding these recommendations, please reach out to the team at Bouchey Financial Group.
Bouchey Financial Group has offices in Saratoga Springs and Historic Downtown Troy, NY as well as Boston, MA and Jupiter, FL.
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