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An IRA Withdrawal Strategy with Tax-Reducing Power
As the year winds to a close, your chance to lower your 2024 tax bill also winds down. If you’re age 70½ or older, you may want to make a qualified charitable distribution (QCD) from your IRA before year end. Normally, distributions from a traditional IRA are taxable. But the amount of your QCD is removed from your taxable income, which may preserve your eligibility for other tax breaks. It also can fulfill your annual required minimum distribution, if applicable.
A QCD can’t be claimed as a charitable contribution deduction. But, depending on your other potential itemized deductions, the standard deduction may save you more tax.
If you’re eligible, you can make a QCD up to $105,000 in 2024. For your QCD to be tax-free, it must be paid from your IRA custodian or trustee directly to an IRS-approved charity. Don’t take chances. Contact the office to nail down the details.
Factoring the QBI Deduction into Year-End Tax Planning for Your Business
Thanks to the Tax Cuts and Jobs Act, sole proprietors and owners of pass-through entities, such as partnerships, S corporations and, generally, limited liability companies, may be able to claim tax deductions based on their qualified business income (QBI) and certain other income.
This deduction can be up to 20% of your QBI, subject to limits that apply at higher income levels. However, some tax planning strategies can increase or decrease your allowable QBI deduction for 2024. So if you’re eligible for this deduction, it’s important to consider the impact other year-end strategies will have on it before executing them. Also keep in mind that the QBI deduction is scheduled to expire at the end of 2025 unless Congress acts to extend it.
Contact the office for help optimizing your overall tax results.
Added Protection for Your Personal and Financial Information
Protection is key when guarding your personal and financial information from fraudsters. That’s why the IRS offers a vital tool, the Identity Protection Personal ID Number (IP PIN). The IP PIN is a six-digit number you can apply for voluntarily. It’s known only to you and the IRS. It’s valid for one year, and you’ll automatically be given a new one after expiration.
To apply for an IP PIN, you must have a Social Security Number or Individual Taxpayer ID Number. You also must verify your identity to the IRS.
Suppose you file your tax return with an incorrect IP PIN. The return will be rejected, or the IRS will reach out to validate the information. For more on IP PINs: https://www.irs.gov/identity-theft-fraud-scams/frequently-asked-questions-about-the-identity-protection-personal-identification-number-ip-pin
