As you prepare to get your tax returns done, there is much to think about. This is not meant to be an exhaustive piece and there will be other things you need to consider. The idea here is to get you thinking and if you are not fully familiar with the process, make sure to consult a qualified tax preparer or CPA.

First, you need to collect all your 1099’s that show interest, dividends and withdrawals from retirement accounts. Each of your employers will send you an annual W-2 documenting any earnings you have received for the year and any taxes that were deducted. You will also need your year-end investment statements to document any capital gains or losses.

Charitable donations that were made on or before December 31, 2024 can qualify for a 2024 deduction. Youshould have documentation and receipts to be eligible for those deductions. Next, begin planning for 2025 charitable donations. If you are over 70 ½, consider making 2025 charitable donations directly from your IRA, especially if you don’t qualify for itemized deductions.

Typically, your tax preparer will provide you with an extensive checklist for any 2024 income, interest and dividends, capital gains, sales of property or a business, retirement contributions and so forth.

The standard deduction will cover most people; but if you itemize deductions, you will need to capture the amounts you spent on medical expenses, interest on a mortgage, property taxes, gifts and donations, state taxes paid, losses from theft or any losses you can claim as part of a federal natural disaster deduction.

If 2024 was relatively successful, you may have some money available to fund a 2024 retirement plan contribution. If eligible contributions can be made to Individual Retirement Accounts (IRAs) and Simplified Employee Pensions (SEPs) prior to filing your tax return, it will lower your 2024 taxable income. Make use of this if you can. If you are in a low tax bracket and are willing to forgo the tax deduction, you might consider a ROTH IRA contribution. Make sure to review income limits and coordinate retirement plan contributions to verify qualification for any of these contributions.

Finally, as you plan for 2025 taxes, review whether your investments are allocated in the most tax efficient way based on your tax bracket and tax exposure. Consider if you should use municipal bonds to reduce taxes on interest earnings or invest in low-dividend or interest stocks to minimize income.

There are many strategies to improve tax efficiency. Working with a Financial Planner such as Oxford Planning Group, LLC can best help review your overall situation and create a clear picture of your long-term strategy.