We get it. Time commitment and inconvenience can make managing your tax situation overwhelming. We're here to help with four, 10-minute tax management steps you can take to put you in a better financial situation for the 2024 tax year and beyond.
1. Maximize retirement plan contributions.
Participants can contribute up to $23,000 annually to 401(k) and 403(b) plans in 2024. If you intend to contribute the max, you will want to plan your contributions over the year to ensure you reach this limit by December, because you can't contribute retroactively like with an IRA. If you will reach age 50 or older in 2024, you can contribute an additional $7,500. Maxing out your contributions gives you the potential to increase your retirement savings as well as lower your current income taxes.
2. Maximize health savings account contributions.
If you have a high-deductible health plan (HDHP), you can contribute $8,300 (family) or $4,150 (individual) to your health savings account (HSA). For eligible after-tax contributions, you can take a corresponding deduction on your tax return. Contributions, earnings, and withdrawals are tax free for federal tax1 purposes when used to pay for qualified medical expenses. Once you reach age 65, you can use your HSA for any reason without penalty—just pay normal income taxes on any money used for a nonqualified medical expense.2
3. Get a better handle on your equity compensation.
If equity compensation is available to you, are you receiving more grants this year? If you have equity compensation, are older grants vesting or expiring? If appropriate for your situation, ask for an equity compensation analysis from your Fidelity Executive Services team. Your Executive Planning Consultant or Benefits Planning Consultant can review the report with you, discuss tax considerations, and identify ways to incorporate your equity compensation into your broader financial picture.
4. Consider a donor-advised fund.
A donor-advised fund (DAF) allows you to give irrevocable contributions to charitable organizations you care about through a charitable investment account. When you contribute cash, securities, or other assets to a DAF at a public charity, such as Fidelity Charitable®, you are generally eligible to take an immediate tax deduction. Then those funds can be invested for tax-free growth, and you can recommend grants to virtually any IRS-qualified public charity. DAFs provide an opportunity to use highly appreciated securities, instead of cash, to fund your charitable goals.
Tackling the above steps that are appropriate for your financial situation can be a great start to better managing your taxes. If you have 15 more minutes, it’s always smart to review your financial plan to determine if you’re on track to meet your goals and what actions you can take to improve your overall financial situation.