We talk about taxes a lot in April and December, but the decisions you make in January can have lasting impacts on your financial success for the year. It is the perfect time to review where you are and where you want to be, reset your strategies, and reconnect with the people who can help you navigate the processes. Here are three steps you can take now to set the tone for 2024.
1. Review: Familiarize yourself with changes to the tax code for the new year.
Every great plan starts with an assessment of the current situation, and January is a great time to take stock of your financial landscape. Understanding where you are in your financial journey and the most current regulations can help you set goals and make necessary adjustments to keep you on track to meet your goals. Your tax strategy is an important part of this process.
The IRS is making some notable changes for the 2024 tax year, including adjustments to account for inflation. For example, the standard deduction will go up between $750 to $1,500, depending on your filing status. Some of the changes, like the increases for gift and estate exclusions and retirement account contribution limits, may directly influence your financial decisions so you can keep more of your hard-earned money.
2. Reset: Make a plan to maximize retirement contributions.
You can’t predict what will happen after you retire, but you do know that not having enough money set aside can drastically change your lifestyle. It’s not just about the number of cruises you’ll be able to take and how close you’ll be to the golf course. You need to be prepared to pay the bills, cover health care costs and handle unexpected expenses for the rest of your life — and leave a financial legacy for the people and causes that matter to you.
Setting aside money today can pay off down the road — and where you store that cash directly affects your taxes now and later. This year, you’ll be able to contribute up to $23,000 to a 401(k) and $7,000 to an IRA. If you currently have $10,000 in an IRA and contribute the maximum for the next 15 years, the balance can reach over $200,000 (assuming a 7% return). Dropping that contribution to $200 each month yields a less impressive balance of just under $88,000.
3. Reconnect: Schedule an appointment with your CPA at KPN
Your CPA is a valuable member of your financial planning team who can help you plan your tax strategy for the upcoming year so you stay on track to meet your goals. Like annual visits to your primary care physician, regular meetings with your CPA can help you catch potential problems and address them before they get out of control. They can also help you estimate and reduce your tax liability to maximize your retirement savings.
After the hustle and bustle of the holidays, there’s some comfort in sliding back into familiar routines and starting new ones. Let’s reconnect and talk about where you’ve been and what you have planned — selling a home, updating the business, retiring, and who’s graduating from high school this year.
Whether you’re a seasoned entrepreneur, a small business owner, or an individual, meeting with your CPA early in the year can help you develop a strategy to optimize your finances. From tax planning and goal setting to reviewing business strategies and optimizing investments, our team of professionals at KPN is here to help you prepare for and execute a winning strategy for your financial success.