Ready for It: End of the Year Tax Tips

It goes fast, doesn’t it? Just when you’re comfortable with the back-to-school routine, here come the holidays. Take a deep breath and enjoy the season – 2024 version.

But once the decorations are packed up and the wrapping paper is in the trash, I hope you’ll set aside a few moments to get ready for a very different kind of season: tax time. You’ll want to be sure to close out the year strong to be in the best situation when tax day rolls around.

Timing is everything

Taxes are usually due on April 15th of each year – unless the day falls on a weekend. However, this tax season will be different for some states, including ours. Because of the devastation of Hurricane Helene, South Carolina will have their taxes due on May 1, 2025.

Get motivated

Begin by estimating your federal income tax bill for the year. You can find your tax bracket as well as standard deduction information on the IRS website. Your federal tax estimate will motivate you to consider using a win-win strategy that can lower your state tax bill.

Save for the win

One of the best moves you can make to subtract from your state tax bill actually involves adding to your own education savings. By contributing to your Future Scholar 529 college savings account, you could reap the benefits of state tax incentives now. South Carolina is one of more than thirty states, along with the District of Columbia, that offer tax incentives to families who save with a 529 plan.

The tax savings can be significant. South Carolina allows residents to deduct 100% of the amount they contribute to Future Scholar, South Carolina’s 529 plan on their SC state income tax return. It’s a great benefit for the citizens of the Palmetto State.

Deadlines matter

Of course, there’s no deadline to contribute to your 529 account. However, if you want your contributions to qualify for tax savings for your 2024 tax returns, you can take advantage of the extended tax deadline and make contributions up until May 1 and deduct them from your South Carolina state income tax return.

Be a frontloader

The IRS has a special gifting feature that will allow a larger amount of money to be given at one time. Called frontloading or superfunding, this feature gives your funds the ability to compound for a longer time than they would if you were making regular annual contributions.

Through frontloading, your 529 plan may be funded up to the 2024 annual exclusion of $18,000 for a single person or $36,000 for a married couple. When you front-load, you contribute a one-time gift of the amount that is usually allowed over five years – without paying gift taxes.

With frontloading, a single person can contribute $90,000 per child in one year and enjoy the benefits of compounding interest on a larger amount. The contribution will be removed from the contributor’s taxable estate and will be treated by the IRS as if $18,000 were given per year for five years. Of course, any contributions made beyond this amount over the five years could be subject to federal taxes. A financial professional can help you decide if front-loading could work for your family and your financial situation.

Earmark your refund

Expecting a tax refund in 2025? Decide today to use it to invest in your child’s future education. Earmark it for a lump sum contribution to boost your 529 college savings. That way you know you’re using it for something meaningful.

Appreciate your genius

While you’re enjoying the last few days of 2024, take a minute to appreciate how smart your decision to save with a Future Scholar 529 account really is. You’re saving for college tax free, and when the time comes to use those 529 funds to pay for qualified education expenses like tuition, books, computers, room and board, you’ll be withdrawing your funds tax-free, too. Congratulations – genius move.

 

About the author

Curtis Loftis is the State Treasurer of South Carolina. He also serves as the administrator of South Carolina’s Future Scholar 529 College Savings Plan. Visit treasurer.sc.gov or futurescholar.com for more information on ways to save through a 529 plan.