4 Money Actions You Should Take Now to Lower Your 2024 Tax Bill

Taxes: Everyone has to pay them, and they are just another part of everyday life. Whether it’s passive income from dividend payments, active income from work, or capital gains from the sale of an asset, you owe taxes to Uncle Sam one way or another.

Learn more: 7 Tax Loopholes the Rich Use to Pay Less and Build More Wealth

Find out: Why failing to leave a financial advisor could be your biggest financial mistake

However, it’s still possible to reduce taxes and increase the amount of money you’re allowed to keep this year.

According to H&R Block and Barron’s, here are four money moves you should take now to reduce your tax liability in 2024. Next, read about the year-end tax moves the rich are making.

Look into tax credits

Make sure you take full advantage of all tax credits available to you. Tax credits provide dollar-for-dollar tax relief, making them more beneficial than most deductions, which typically only reduce your tax liability by a certain percentage based on your tax bracket.

Some types of tax credits include the Earned Income Tax Credit, the Retirement Saver Contribution Credit, the American Opportunity Tax Credit, the Lifetime Learning Credit, and the Child and Dependent Care Credit. If you are unsure about the tax credits you are entitled to, contact a financial professional who can help you file your 2024 tax return. This way, no tax credits are left on the table.

Consider the following: American Opportunity Tax Credit: What is it and who is eligible?

Contribute to your retirement accounts

Making 401(k) or IRA contributions is a smart way to reduce your tax liability. The higher the percentage of your gross income that you put toward your pre-tax retirement account this year, the less taxes you will owe the IRS because you are deferring tax liability until later in life.

Don’t forget that even small contributions starting in your 20s mean taking advantage of compound interest, allowing your savings to grow exponentially over time while reducing your tax bill.

Tax loss recovery

Tax loss harvesting happens when you sell a losing asset to offset or even cancel out your tax liability from the sale of an asset that made significant gains. This allows you to keep more of the money made from the winnings.

If you don’t sell any of your lost assets, you’ll be subject to short-term or long-term capital gains tax on realized gains, depending on how long you held the asset before selling it. It is important to sell all lost assets by December 31st to take advantage of the tax losses.

Check your tax withholding status

It’s important to determine the correct tax withholdings to ensure you have enough net income throughout the year rather than waiting for a tax refund when you file.

Withholding too little could mean you’re responsible for a large tax bill next April. Withholding too much could result in giving Uncle Sam an interest-free loan all year long. It’s a good idea to use the IRS’s Tax Withholding Estimator to determine the correct withholdings based on your income.

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This article originally appeared on GOBankingRates.com: 4 Money Actions You Should Take Now to Lower Your 2024 Tax Bill

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