Getting Ready for Tax Time: Key Considerations For Both Retirees & Those Who Are Still Working

Tax season is in full-swing, and whether you are retired or still in the workforce, it’s important to be prepared. Understanding how your income, deductions, and credits affect your tax return can help ensure that you are maximizing your benefits and minimizing your tax liabilities. Whether you’re navigating retirement income, required distributions, or job-related expenses, taking time to review the details of your tax return is crucial. The following considerations will help guide you in reviewing your 2024 tax return.

When reviewing your 2024 tax return as a retiree, there are several key considerations to keep in mind:

Social Security Benefits:
Determine how much of your Social Security income is taxable. If you have other sources of income, a portion of your Social Security may be subject to taxes. The taxable portion can depend on your combined income (total income plus half of your Social Security benefits).

Required Minimum Distributions (RMDs):
If you are 73 or older (as of 2024), you are required to take RMDs from your retirement accounts (such as traditional IRAs and 401(k)s). Ensure that you’ve taken the appropriate distribution for the year and report it correctly.

Pension and Retirement Income:
Pensions, annuities, and other retirement income sources are generally at least partially taxable. Review how these are reported on your tax return to ensure that your income is properly accounted for.  Specifically, make certain your tax preparer is aware of any Qualified Charitable Distributions that you made from your IRA during the tax year 2024!

Tax-Advantaged Accounts:
If you still have tax-advantaged accounts such as IRAs or Roth IRAs, review any contributions or conversions that may have been made during the year. Roth IRAs, for example, are not taxable upon withdrawal, but conversions from traditional IRAs to Roth IRAs are taxable.

Deductions and Credits:
You may be eligible for various deductions or credits specific to retirees, including the standard deduction for those over 65 (which is higher than the basic standard deduction), medical expense deductions (if they exceed a certain percentage of your income), or credits for certain types of care or living assistance.

State Taxes:
Various states tax Social Security income, pension income, or retirement distributions differently, so make sure to review how your state taxes your income. If you’ve moved to a new state, consider how your new state's tax laws will affect you.

Tax Rate Changes:
Changes to tax brackets or rates may impact your overall tax liability. Stay up-to-date on any tax law changes that could affect your situation.

Health Savings Accounts (HSAs) and Medical Deductions:
If you qualify for an HSA or have significant medical expenses, ensure that you’ve maximized your contributions or are deducting eligible medical costs that exceed the IRS threshold.

Estate and Gift Tax Planning:
Consider any potential estate or gift tax implications if you made large gifts or have substantial assets in retirement accounts or other investments.

Tax Withholding and Estimated Payments:
Make sure your withholding or estimated payments are on track to avoid penalties. Many retirees rely on withholding from retirement accounts or make quarterly estimated tax payments.

When reviewing your 2024 tax return as someone who is working, here are some important considerations:

Income Reporting:
Make sure all sources of income are correctly reported, including wages, salary, self-employment income, and any additional side income. Check that your W-2s (from employers) or 1099s (for contractors, freelancers, etc.) are accurate.

Tax Withholding:
Review whether your tax withholding is on track. If you received a large refund or owe a significant amount, you might want to adjust your withholding for the next year. Use the IRS’s withholding calculator to estimate if any adjustments are needed.

Deductions and Credits:
Review any deductions or credits you are eligible for. Common examples include the standard deduction (or itemizing deductions like mortgage interest, property taxes, charitable contributions, or medical expenses), child tax credits, or education-related credits (e.g., Lifetime Learning Credit or American Opportunity Credit).

Retirement Contributions:
Check if you contributed to any retirement accounts (e.g., 401(k), IRA) and make sure those contributions were reported correctly. Contributions to traditional IRAs or 401(k)s can reduce your taxable income. If you contributed to a Roth account, keep in mind those amounts are not tax-deductible but grow tax-free.

Health Savings Accounts (HSAs):
If you have an HSA, verify that your contributions and distributions are accurate. Contributions to HSAs are tax-deductible, and withdrawals used for qualifying medical expenses are tax-free.

State Taxes:
Some states have unique tax laws that may affect your filing, especially around deductions, credits, or the taxation of specific income types (like state-specific credits for working individuals). Review your state’s tax return closely to ensure compliance and maximize potential savings.

Job-Related Expenses:
If you’re eligible for job-related deductions (though these have become less common under recent tax law), review whether you can claim any unreimbursed work expenses, particularly if you’re self-employed or have a side business.

Self-Employment Considerations:
If you’re self-employed, you need to review your income, expenses, and deductions related to your business. Be sure to track things like business mileage, home office deductions, and other business-related costs that could reduce your taxable income.

Taxable Benefits:
If you receive benefits from your employer, such as health insurance, stock options, or bonuses, ensure those are accounted for correctly in your tax return. Some benefits are taxable, while others may not be.

Tax Rate Changes:
Be aware of any changes to the tax brackets or tax rates in the current year. This can affect how much you owe or the amount of your refund.

Student Loan Interest:
If you have student loans, check whether you qualify to deduct the interest paid on your loans. There are income limits for this deduction, so review whether you meet the eligibility criteria.

Tax Planning for Future Years:
It might be a good time to review your overall tax strategy with a tax advisor to plan for future years. This could involve adjusting your withholding, contributions to retirement accounts, or utilizing tax-saving strategies for upcoming years.

Reviewing these considerations carefully can help ensure that you're taking advantage of available benefits and avoiding potential pitfalls. If you’re unsure, it may be helpful to consult with your CPA and your Gilbert & Cook Advisor, both of whom can offer personalized guidance and help navigate the specifics of your financial situation.

---

Authored By: Al Ryerson, CPA, ASA, CDFA®

All opinions expressed in this article are for general informational purposes and constitute the judgment of the author(s) as of the date of the report. These opinions are subject to change without notice and are not intended to provide specific advice or recommendations for any individual or on any specific security. The material has been gathered from sources believed to be reliable, however Adviser cannot guarantee the accuracy or completeness of such information, and certain information presented here may have been condensed or summarized from its original source. Gilbert & Cook does not provide tax or legal or accounting advice, and nothing contained in these materials should be taken as such. To determine which investments may be appropriate for you, consult your financial advisor prior to investing. As always please remember investing involves risk and possible loss of principal capital and past performance does not guarantee future returns; please seek advice from a licensed professional. Gilbert & Cook is a Registered Investment Adviser. SEC Registration does not constitute an endorsement of Gilbert & Cook by the SEC nor does it indicate that Gilbert & Cook has attained a particular level of skill or ability. Advisory services are only offered to clients or prospective clients where Adviser and its representatives are properly licensed or exempt from licensure. No advice may be rendered by Adviser unless a client service agreement is in place.