Personal Tax Review Checklist

Like most of us, you just filed your 2023 Tax Return! While it’s top of mind, it’s the perfect time to take inventory of your financial and tax situation – planning ahead for 2024.

As it goes for most strategies, it’s best not to wait until the very last minute to implement time and financial-saving protocols.

Estimated Taxes, Late-Penalty Increase in 2024: If you are a freelancer, self-employed, small business owner, landlord, and others, mark your calendar for estimated tax payment due dates. The IRS increased its penalty interest charges on the amount of underpayment to 8% for individuals, until the balance is paid in full.

2024 Quarterly Payment Due Dates:

• April 15, 2024
• June 17, 2024
• September 16, 2024
• January 15, 2025

Plan Charitable Giving and Tithing Strategically: Instead of donating cash from your checking/savings account, consider donating appreciated assets/stock that has been held for longer than 1 year. Send directly to a qualified charity to receive a deduction (up to 30% of AGI) for the fair market value of the asset, while avoiding capital gains tax on the appreciation.

If you are over age 70.5, consider making Qualified Charitable Distributions(QCDs) from your IRA to a qualified charity. The IRA donation is tax free, up to $105,000 per year ($210,000 if married filing jointly) in 2024, it does not increase your taxable income, and it counts toward your Required Minimum Distribution.

Note: you cannot also deduct the QCD as an itemized deduction.

Harvest Investment Losses: Many look to tax-loss harvesting at the end of the year; however, this strategy is best implemented throughout the year,anytime you have investments that have declined in value. When you sell an asset for less than you paid, to realize capital losses, you can use the losses to offset other capital gains and potentially reduce your tax liability now, or in the future (the amount carries forward year after year).
Shift into Tax-Efficient Investments: Consider investing in tax-efficient investment vehicles such as index funds, exchange-traded funds (ETFs),REITs, or municipal bonds. These investments can help minimize your tax liability by reducing capital gains taxes and generating tax-free or tax-deferred income.

If your portfolio consists primarily of Mutual Funds, it might be beneficial to reach out to Madrona Financialfor an assessment. We can help you explore options for transitioning into investments that are more tax-efficient.

In a Lower Income Bracket? Will you be in a lower income tax bracket this year? If so, you may consider Roth Conversions, a strategy
to pay tax at a lower bracket on your tax-deferred IRA funds. The IRA funds are then directly converted to Roth, where assets grow tax free indefinitely!

Conversions have their own 5-year rule, so those specific funds can’t come out of the account for 5 years, even if the Roth had been open for 5 years prior.Adjust Withholding: Review your withholding to ensure that you’re havingthe correct amount of tax withheld from your paychecks.
If you got a huge tax bill for 2023 taxes and don’t want to relive that pain, you may want to increase your withholding.
If you got a huge refund in 2023 and would rather have that money included in your paycheck throughout the year, do the opposite and reduce your withholding.

You can adjust your withholding at any time by submitting a new Form W-4 to your employer. The form can be downloaded on the IRS website or yourW-4 may be available through your employer portal.

Contribute to Retirement Accounts: Review your retirement plan contributions for the year ahead.
If you want to reduce your taxable income in 2024, maximize contributions to tax-deferred traditional retirement accounts. If you prefer long-term tax-free growth and think tax rates will be higher in the future, a Roth option may be a better fit.

Tax year 2024, annual contribution limits:

• Roth and traditional IRAs: $7,000 ($8,000 for age 50+)
• 401(k), 403(b), TSP, and most 457s: $23,000 ($30,500 for age 50+)

Take Advantage of Employer Benefits: If your employer offers tax-advantagebenefits, take advantage of them now.Amounts contributed are not subject to Federal Income tax, Social Security tax or Medicare tax.

Tax year 2024, annual contribution limits:

• Health savings accounts (HSA): $4,150 for self-only and $8,300 for fam-ily (additional $1,000 as a catch-up contribution for age 55+)
• Flexible Spending Account (FSA): $3,200 for each spouse’s employer plan (up to $6,400 total for a household). For FSAs that permit the carryover of unused amounts, the maximum 2024 carryover amount to 2025 is $640.
• Dependent Daycare Flexible Spending Account (FSA): $5,000 for single filers and couples filing jointly.
• Commuter benefits: up to $315 per month.

Maximize Tax Credits: Tax credits directly reduce your tax liability, dollar-for-dollar. For instance, a tax credit valued at $1,000 lowers your final taxbill by $1,000. So be sure to plan for and take advantage of any credits you’re eligible for!

Common examples of tax credits include education expenses, child and dependent care expenses, energy-efficient home improvements, or adoption expenses.

Itemize Deductions: Track your eligible deductions throughout the year. If your eligible deductions exceed the standard deduction, you can claim a greater tax deduction on your 2024 return.

Tax year 2024, standard deduction:

• Married couples filing jointly: $29,200
• Single taxpayers and married individuals filing separately: $14,600
• Heads of households: $21,900

Common deductible expenses include mortgage interest, property taxes,state and local taxes, charitable contributions, and certain medical/dental expenses.

You may also consider “bunching,” or aggregating multiple years of charitable deductions into a single year, to exceed the standard deduction and capture a larger write-off.

Consult with a Professional: If you have a complex financial situation or if you’re unsure about the best tax-saving strategies for your circumstances,consider consulting with a CPA that is also a Financial Advisor. Madrona Common deductible expenses include mortgage interest, property taxes,state and local taxes, charitable contributions, and certain medical/dental expenses.
You may also consider “bunching,” or aggregating multiple years of charitable deductions into a single year, to exceed the standard deduction and capture a larger write-off.
Consult with a Professional: If you have a complex financial situation or if you’re unsure about the best tax-saving strategies for your circumstances,consider consulting with a CPA that is also a Financial Advisor. Madrona Financial & CPAs can provide personalized advice and help you develop atax-efficient plan. To speak with an Advisor or CPA call 833-673-7373 orvisit MadronaFinancial.com

Growing Your Wealth with Danielle Meister. For over 30 years, Madrona Financial & CPAs has been helping individuals and families improve their financial well-being by giving them experienced advice on public and alternative investments, real estate, insurance, taxes, executive compensation,business structure and business succession strategies, advanced gifting strategies, estate planning, and more. Danielle and her staffhave offices in Park City and Cottonwood Heights, Utah, while Madrona is headquartered in Washington State.

DISCLOSURES: The information, suggestions, and recommendations included in this material is for informational purposes only and cannot be relied upon for any financial, legal or insurance purposes. Madrona Financial Services will not be held responsible for any detrimental reliance you place on this information. It is agreed that use of this information shall be on an “as is” basis and entirely at your own risk. Additionally, Madrona Financial Services cannot and does not guarantee the performance of any investment or insurance product. Insurance products are offered through Madrona Insurance Services, LLC, a licensed insurance agency and affiliate of Madrona Financial Services. Madrona Insurance Services and individual advisors affiliated with Madrona Insurance Services and Madrona Financial Services receives commissions on the sale of insurance products. Clients are not required to purchase insurance products recommended or to otherwise implement financial advice through Madrona affiliates. When we refer to preparation and filing of tax returns, tax returns are prepared and filed by our wholly-owned sister company Bauer Evans, Inc. P.S., a licensed certified public accounting firm. Madrona Financial Services, LLC is a registered investment adviser with the SEC. Our registration with the SEC or with any state securities authority does not implya certain level of skill or training. Madrona Financial & CPAs is a registered trade name used singly and collectively for the affiliated entities Madrona Financial Services, LLC (“Madrona”) and Bauer Evans, Inc., P.C. (“Bauer Evans”). Investment advisory services are provided through Madrona. CPA services are provided through Bauer Evans.